Gold Hits Two-Week High Amid Hopes for US-Iran Peace
Gold prices rose for the third straight session on Thursday (May 7th) and hit a two-week high, supported by easing inflation concerns amid hopes for a US-Iran peace deal, as well as a weaker US dollar.
Spot gold rose 1.2% to US$4,747.26 an ounce at 9:47 a.m. ET (13:47 GMT), while June gold futures rose 1.3% to US$4,753.71.
The rally continued after gold surged more than 3% on Wednesday—its biggest daily gain since late March—when oil prices fell sharply on expectations that Middle East tensions could ease. Britannia Global Markets said the market is now likely to “wait for clarity” on the US-Iran diplomatic path, with Tehran reviewing new proposals that could pave the way for reopening the Strait of Hormuz.
Diplomatic developments are a key focus. Iran is reportedly evaluating a US proposal to end the war that has lasted more than two months, while President Donald Trump continues to threaten further attacks if a deal fails. The Wall Street Journal reports that talks through mediators have led to a one-page, 14-point framework for restarting negotiations, which could begin next week in Pakistan, before a month-long process to address nuclear issues and sanctions relief, although key differences remain over enrichment and inspections. CNN reports that Iran is expected to deliver a response to mediators on Thursday.
The transmission channels are clear: the prospect of normalizing energy flows is pressuring oil, alleviating inflation concerns, and lowering US bond yields, thus boosting the appeal of non-yielding assets like gold. ING believes the potential easing of energy price pressures provides room for the Fed to cut interest rates, which supports gold. At the same time, a weaker US dollar is boosting demand by making gold cheaper for non-US buyers, after the dollar had previously enjoyed safe-haven support during the conflict.
The market now awaits the US Non-Farm Payrolls data on Friday for further clues on the direction of the Fed's interest rate policy.
The variables being monitored are: the clarity and credibility of the US-Iran agreement framework (including the Hormuz issue), the direction of energy prices as a determinant of inflationary pressures, the response of Treasury yields and the dollar, and the latest signals from Fed officials regarding the balance of inflation risks and labor market resilience.
Source: newsmaker.id
