Gold Rises as Market Weighs US-Iran Signals and Oil Direction
Gold prices rose on Tuesday as market participants assessed conflicting signals from the United States and Iran regarding the chances of a diplomatic resolution amid escalating clashes around the Strait of Hormuz. Bullion briefly rose as much as 1.3% to $4,540 per ounce, erasing most of the previous session's losses.
US President Donald Trump said talks with Iran were proceeding "rapidly," allaying concerns after Tehran's earlier threats to suspend diplomacy and completely close the strategic waterway. However, differing statements between Trump and Israeli Prime Minister Benjamin Netanyahu regarding a phone call regarding the fighting in Lebanon added to uncertainty about the direction of talks to end the conflict, which has triggered a global energy crisis and entered its fourth month.
In terms of fundamental transmission, gold's gains coincided with a decline in oil prices on the same day. Ole Hansen, head of commodity strategy at Saxo Bank, said gold moves "in the rhythm" of oil because of its link to inflation expectations, which in turn influence the direction of interest rates, yields, and the dollar—the main factors that shape gold prices.
Despite its strengthening, gold's position remains fragile in the longer term. Since the conflict began in late February, gold has fallen sharply and remains around 14% below pre-war levels, although it has been moving within a narrow range in recent weeks. The market believes that if energy and trade flows through Hormuz recover, inflation concerns could ease, opening the door to monetary policy easing—a condition that generally supports gold as it does not yield interest.
However, the scope for this policy easing is potentially limited by strong US data. US manufacturing activity in May reportedly expanded at the fastest pace in four years and recorded a fifth consecutive month of expansion, which could reduce the urgency for the Federal Reserve to cut interest rates anytime soon. Rhona O'Connell of StoneX believes that gold's outlook remains highly dependent on developments in the Middle East; despite progress, key issues remain unresolved, so prices are likely to remain within a range, with a downward bias if interest rate expectations remain high.
At 12:52 p.m. in London, spot gold rose 1% to $4,528.93 per ounce. Silver rose 2.1% to $76.42 per ounce, while platinum and palladium also gained. The Bloomberg Dollar Spot Index fell 0.1%, adding technical support to the precious metal during the session.
5 Key Points
-Gold rose, driven by uncertainty over US-Iran signals and risks in the Strait of Hormuz.
-Gold briefly strengthened as much as 1.3% to $4,540 per ounce, erasing the previous session's losses.
-Correcting oil prices supported gold through inflation, interest rates, yields, and the dollar.
-Gold remains about 14% below pre-war levels and has been moving within a narrow range for the past few weeks.
-Strong US manufacturing data has the potential to limit expectations of interest rate cuts, thus limiting gold's upside. (gn)*
Source: Newsmaker.id
