Gold Rises as Inflation Concerns Ease Following U.S.-Iran Negotiations

SadaNews - The price of gold rose as efforts renewed toward finding a diplomatic solution to the war in Iran, easing inflation-related concerns, despite ongoing tensions around the Strait of Hormuz.

The precious metal increased by as much as 1% to approach $4,838 per ounce, erasing most of the losses incurred in the previous session. The United States and Iran are considering extending the ceasefire for two weeks to allow more time for negotiating a peace agreement, according to an informed source, while shipping traffic through the Strait of Hormuz remains constrained under a U.S. blockade on Iranian vessels, with Tehran keeping the vital passage closed to most other shipping.

The Associated Press reported that both sides reached a "preliminary agreement" to continue diplomatic efforts following an inconclusive first round of talks in Pakistan over the weekend. U.S. President Donald Trump downplayed the likelihood of a renewed war on Tuesday, stating to Fox Business that the nearly seven-week war "is close to ending".

Oil Stable and U.S. Stocks Soar

Oil prices stabilized while U.S. stocks closed at record levels on Wednesday, and the dollar index slipped slightly. The recent decline in crude oil prices has alleviated inflation fears, which might lead central banks to keep interest rates steady for longer or even raise them.

Swap markets still bet that the Federal Reserve will keep interest rates unchanged this year, supported by statements from officials, including St. Louis Fed President Alberto Musalem and Cleveland Fed President Beth Hammack, who indicated that rates could remain "stable for a long time". High borrowing costs are a negative factor for gold, which does not yield returns.

Suki Cooper, head of global commodity research at Standard Chartered, noted in a memo: "In light of the fragility of the truce and the shift towards focusing on real yields, gold has not yet exited the risk zone, and liquidity needs could continue to pressure prices." She added that "policy responses will be a critical factor" amid the balance between inflation risks and slowing growth, as gold shifts away from moving in parallel with high-risk assets.

Gold prices have fallen about 8% since the start of the war, as a liquidity crunch in the early weeks of the conflict forced investors to sell their holdings and cover losses elsewhere. In a sign that buyers are returning to the market, gold-backed exchange-traded funds added about 25 tons since the start of the month, after cutting their holdings by about 94 tons in March, according to Bloomberg's calculations.

Spot gold rose 0.8% to $4,830.20 per ounce by 09:11 AM Singapore time. Silver increased by 1.7% to $80.31. Platinum and palladium also rose. The Bloomberg Dollar Spot Index fell by 0.1%.

Silver Ounce Price

Silver prices also reached around $80 per ounce.