Fluctuations in Gold and Silver Prices as Inflation Fears Ease Due to Hopes of a Washington-Tehran Deal

SadaNews - Gold rose as inflation fears eased due to indications that the United States and Iran are nearing a deal that would reopen the Strait of Hormuz.

The precious metal increased by about 1.6% to $4,563 per ounce, erasing a moderate loss recorded last week.

Negotiations regarding the exact wording of the agreement were ongoing, and it may take several days for both sides to receive final approval, U.S. officials told reporters on Sunday. For his part, President Donald Trump emphasized on social media that he will not "rush" into an agreement.

Earlier, U.S. Secretary of State Marco Rubio stated that there could be "some good news" regarding the Strait of Hormuz in the coming hours, as Iran and Washington move forward with peace negotiations.

Conflicting Statements Keep the Market Cautious

Justin Lin, an analyst at Global X ETFs in Sydney, noted that the gold market’s reaction to the news remained "relatively limited".

He added: "Markets have seen Trump's announcements fade without result several times now, and they need to see concrete evidence of cooperation from Iran before confirming bullish moves and lowering inflation expectations".

Gold is still down about 13% since the start of the conflict in late February. Traders have intensified their bets on interest rate hikes after the war led to rising energy prices.

Financial markets currently expect the Federal Reserve to start raising interest rates by December. Higher interest rates negatively affect gold, which does not yield interest.

Anticipation of Kevin Warsh's Moves on Interest Rates

With new Federal Reserve Chairman Kevin Warsh taking the lead, investors will look for hints about his outlook on the economy.

Christopher Wong, a strategist at Oversea Chinese Banking Corp, indicated that there may be some hesitation in pursuing the gold recovery, given that key details related to Iran's nuclear program are still absent.

He added that markets in the United States, the United Kingdom, Hong Kong, and South Korea are also closed due to Monday holidays, leading to "weaker liquidity due to the holidays".

Platinum and palladium prices have risen, while the Bloomberg Spot Dollar Index, a measure of the U.S. currency, fell by 0.3%.

Silver Prices

Silver prices were also recorded near $77.