Gold Records Slight Increase as US Rate Hike Bets Ease

SadaNews - There has been little change in gold prices, as optimism regarding efforts to end the Middle East conflict and bets on interest rate hikes dims.

The precious metal traded near $4,529 an ounce in early trading, following a 1.4% rise in the previous session.

President Donald Trump stated that the United States is in the "final stages" with Iran. The dollar and Treasury yields fell on Wednesday, supporting gold, since it is priced in U.S. dollars and does not yield any interest.

A potential end to the war, and consequently the reopening of the Hormuz Strait, could ease inflation concerns driven by rising energy prices, reducing expectations that global central banks will keep interest rates high for an extended period. This would be positive for the non-yielding precious metal, which usually performs well in a low interest rate environment.

Gold Between Cautious Optimism and Interest Rate Concerns

However, the repeated volatility in statements from both sides of the conflict limits investors' optimism. The precious metal has declined by about 14% since the onset of the war in late February, while 10-year Treasury yields remain near their highest levels in nearly a year.

The minutes from the latest Federal Reserve monetary policy meeting showed that most officials warned that the U.S. central bank will likely need to consider raising interest rates if inflation continues to move above their target persistently.

Gold has traded in a narrow range since its sharp decline in the early days of the Middle East conflict, as investors weigh higher interest rates against a scenario characterized by high inflation and low growth, which they believe should support gold.

Analysts at Citigroup Inc., including Kenny Ho, wrote in a note: "When the situation in the Hormuz Strait eventually calms, the prevailing headwinds against gold will ease, and gold prices are likely to reach their bottom."

They noted that if the waterway remains closed for a much longer period, concerns would shift towards stagflation, a condition in which precious metals historically tend to perform well.

Spot gold stabilized with little change at $4,542.16 an ounce by 7:45 AM in Singapore. Silver fell by 0.1% to $75.83. The Bloomberg Dollar Spot Index, a measure of the U.S. currency, rose slightly after ending the previous session down 0.3%.

Silver Price

Silver prices also registered near $75 an ounce.