Gold Steady, Focus on New Iran Proposal
Gold prices held steady after two days of declines, as the market continued to monitor the progress of US-Iran negotiations amid the closure of the Strait of Hormuz, which is seen as increasing inflation risks. Bullion held around $4,590 per ounce in early trading.
Gold had previously fallen 2.4% in the past two sessions and hit a nearly four-week low. US President Donald Trump said Iran had asked the US to lift its naval blockade of Hormuz as the two sides negotiated an end to the two-month war that has disrupted global energy supplies.
Mediators in Pakistan are said to expect Iran to submit a revised proposal in the coming days, according to a CNN report. The market views any sign of the reopening of the energy route as crucial, as it could potentially impact oil prices and the direction of inflation.
Investors are also awaiting a series of interest rate decisions in the US, the European Union, the UK, and Canada in the coming days. In Japan, the Bank of Japan maintained its benchmark interest rate at 0.75% in a split vote, which is seen as increasing the likelihood of a hike in June.
The Federal Reserve is widely expected to hold interest rates at its meeting ending Wednesday, while investors are also monitoring the issue of Jerome Powell's position after his term as chairman ends. Amidst high energy inflation, markets are likely monitoring whether the central bank's tone is shifting toward "higher-for-longer."
From a fundamental perspective, energy supply shocks heighten inflation risks and increase the likelihood of interest rates being held for longer or even raised, which is a drag on gold, as it offers no yield. Rising yields also increase the opportunity cost of holding gold, and gold is said to have fallen by around 13% since the conflict began in late February when oil prices surged.
Technically, Ole Hansen of Saxo Bank noted the emergence of selling pressure after gold broke through support around $4,650. He believes the market's near-term focus remains on mediation efforts, with the reopening of the strait and the decline in oil seen as the main positive catalysts for the precious metal. In recent trading, spot gold fell 0.2% to $4,589.04 (7:38 a.m. Singapore time), silver rose 0.1% to $73.13, while the Bloomberg Dollar Index was stable. (asd)
Source: Newsmake.id
