Quick overview

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Gold prices rallied following significant purchases by China’s central bank, even though new conflicts in the Middle East threatened to shatter a precarious ceasefire.  The yellow metal was trading close to $4,720 per ounce after closing the previous session slightly lower.

Gold prices stayed steady in Asian trading on Tuesday as investors watched a shaky ceasefire between the US and Iran and anticipated a meeting between Chinese President Xi Jinping and Donald Trump later this week. Trump referred to Iran’s response to a US-backed peace proposal as a “piece of garbage” and warned that the ceasefire might collapse following weeks of indirect negotiations. His description of the truce as being on “massive life support” increased fears of a new escalation in the Gulf region.

. Iran, however, stated that its armed forces were prepared to respond violently to any “act of aggression.  Iranian officials insisted that Tehran’s demands—which included acknowledging its sovereignty over the Strait of Hormuz, lifting sanctions, and resuming oil exports—were reasonable. Oil prices remained high on Tuesday due to worries about possible supply disruptions through the Strait of Hormuz, a crucial route for international crude shipments

 

The US attacked military targets there after Iran opened fire on three navy destroyers passing through the strait,

The clashes heightened tensions as the United States seeks to end a war that is now in its third month and awaits Iran’s response to its proposal to reopen the Strait of Hormuz, a vital waterway for energy flows.

There are indications that central bank demand, which has played a significant role in the multiyear increase in gold prices, might persist. According to data released on Thursday, the People’s Bank of China, one of the largest official sector purchasers of the precious metal, purchased 8 tons in April. As a result, last month’s sales reached their highest level since 2024. Ahmad Assiri, an analyst at Pepperstone Group Ltd., stated that the PBOC’s continuation of a buying run “can be encouraging for Asian buyers.”.

He stated that “what we see for now is early positioning for the potential rally” that may occur after the worst of the Middle East conflict has passed. Since the conflict began, gold has dropped about 11% as worries about rising inflation that would prolong higher interest rates were heightened by the near-closure of Hormuz and the ensuing shock to energy prices.

Higher rates and a stronger US dollar are detrimental since bullion is priced in US dollars and pays no interest.