Quick overview

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Gold prices increased after US President Donald Trump and Iran agreed to a two-week ceasefire to complete negotiations on ending the conflict that has rocked international markets.

 

Bullion added to a gain of 1.2 percent in the previous session, rising as much as 3.2 percent to above $4,850 per ounce. Less than two hours before a self-imposed deadline to destroy Iran’s “whole civilization,” Trump announced on social media that he had consented to halt bombing, citing the reopening of the Strait of Hormuz as a crucial prerequisite.

Iran claimed that safe travel across the strait was “possible.” Gold valued in US dollars was supported when oil fell below $100 per barrel, and the dollar also declined.

The MSCI’s Asia-Pacific index reached a three-week high as stocks surged. Bullion’s traditional haven appeal has been diminished by some investors’ need to cover losses elsewhere in their portfolios, and it has traded mostly in tandem with stocks since the start of the Middle East conflict.

Energy prices have surged, and inflationary risks have increased as the conflict enters its sixth week, increasing the likelihood that central banks will postpone or even raise interest rate reductions.

Bond traders anticipate the Federal Reserve will maintain stable borrowing costs for the remainder of the year, which would be detrimental to non-yielding gold. Since the start of the conflict at the end of February, the price of gold has dropped by roughly 9%. Hopes for a ceasefire and expectations that a slowdown in global economic growth will act as a counter to bets on stable or higher borrowing costs have fueled a modest recovery in recent days.

Three Fed officials voiced concerns about inflation and slowing growth on Tuesday before the ceasefire. Vice Chair Philip Jefferson stated that interest rates are generally in a range that neither stimulates nor inhibits the economy, while Fed Bank of New York Governor John Williams stated that his predictions regarding underlying price pressures in the US remained mostly unchanged.