Gold Gains Ground Near $4.4K as US-Iran Peace Efforts Dampen Inflation Outlook

Gold rose as concerns about inflation subsided amid a renewed push for a diplomatic solution to the Iran war despite ongoing tensions in the Strait of Hormuz.

Bullion erased most of a loss from the previous session, rising as much as 1 percent to almost $4.4K per ounce. According to a person familiar with the situation, the US and Iran are considering extending the ceasefire by two weeks to give more time to negotiate a resolution to the conflict that has affected international markets.

However, the US blockade of Iranian ships and Tehran’s closure of the vital waterway to most other traffic continue to restrict the flow of vessels through Hormuz.

The two sides have an “in principle agreement” to pursue further diplomacy following a fruitless first round of negotiations in Pakistan over the weekend, according to the Associated Press.

US President Donald Trump told Fox Business on Tuesday that the nearly seven-week war is “close to over,” downplaying the possibility of fresh combat.

Oil was steady on Thursday, despite US stocks closing the day at all-time highs and a dollar gauge slightly declining. Concerns about inflation, which had raised the possibility that central banks would raise or maintain interest rates, have subsided amid recent drops in crude prices.

Fed Bank of St. Louis is in favor of the swap market’s ongoing wager that the US Federal Reserve won’t raise interest rates this year. Rates are “on hold for a good while,” according to Alberto Musalem, president of Louis, and Beth Hammack, president of Fed Bank of Cleveland.

Higher borrowing costs are a barrier to non-yielding bullion. In a note, Suki Cooper, global head of commodities research at Standard Chartered Plc, stated that “gold is not yet out of the woods, and liquidity needs could continue to pressure prices further given the fragile ceasefire and switch to focus on real yields.”

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Olumide Adesina

Financial Market Writer

Olumide Adesina is a French-born Nigerian financial writer. He tracks the financial markets with over 15 years of working experience in investment trading.

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