Quick overview

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Gold was headed for a second weekly decline as traders assessed the likelihood of a long-awaited agreement to end the US-Iran war, which has shaken international markets and fueled inflation. Bullion lost some of its gains from the previous session as it dropped as much as 1% to almost $4,170 per ounce on Friday.

 

Even after President Donald Trump canceled a third day of US airstrikes on Iran, claiming the supreme leader of the Islamic Republic had agreed to a peace agreement that could be signed this weekend, the metal was still on track to lose about 3.5 percent for the week. The agreement is “a very strong memorandum of understanding that is a little bit conceptual,” according to the US president

However, according to the semi-official Iranian Students’ News Agency, which cited Foreign Ministry spokesperson Esmail Baghaei, Iran has “not yet reached a conclusion on this matter” and the matter is still under review. Investors have grown more wary of tak after over 30 similar announcements in recent months.

The Middle East conflict, currently in its fourth month, has disrupted energy flows through the Strait of Hormuz, driving up oil prices and raising the possibility of interest rate increases as central banks fight to control inflation. For the first time in nearly three years, the European Central Bank raised interest rates on Thursday. President Christine Lagarde warned that inflation brought on by the conflict is spreading beyond energy.

According to Hansen, “the market needs confidence that the inflation genie is being pushed back into the bottle before it can look further ahead and refocus on longer-term supportive themes.”. Until then, short-term momentum traders will continue to drive the market. The price of gold is roughly a fifth lower than it was at the end of February, when the war started. Due to further selling this week brought on by the metal’s recent decline through its 200-day moving average, a closely watched indicator of long-term momentum, bullion is now close to $4,000 per ounce.