Gold Snaps Nine-Day Losing Streak on Hopes of War Deescalation
Gold advanced, snapping nine straight sessions of daily declines, following reports that the US is seeking a one-month ceasefire to hold talks with Iran.
Bullion rose as much as 1.7% late in Tuesday’s session after Israel’s Channel 12 cited sources on a US approach to possible talks with Iran. Stocks pared declines while the dollar and Treasury yields gave up some early gains. The ceasefire report “got things juiced,” said Nicky Shiels, head of metals strategy at MKS PAMP SA.
Earlier Tuesday, gold swung between gains and losses as traders weighed a range of possible outcomes for the Middle East conflict.
President Donald Trump signaled that Iran had offered a “present” as a show of good faith in negotiations, noting it was related to Strait of Hormuz flows. The US and regional mediators are discussing the possibility of holding high-level peace talks as soon as Thursday, but await a response from Tehran, Axios reported.
Earlier Tuesday, the Wall Street Journal reported that the US is planning to deploy about 3,000 troops from the 82nd Airborne Division to the Middle East as the White House weighs options to ease Iran’s choke-hold on the Strait of Hormuz.
Elevated energy prices resulting from the Iran war have raised the risk of inflation, leading investors to bet on higher interest rates. That’s a headwind for non-yielding bullion. Declines in global stocks and bonds have also forced investors to ditch their positions in gold to raise cash, further amplifying the losses in bullion, which is still on the cusp of entering a bear market.
Like most asset classes, gold has been whipsawed as traders face a barrage of war-related headlines. Fighting between the US-Israeli alliance and Iran raged unabated, even as Trump claimed talks are under way to end the conflict. Iran has started charging transit fees on some commercial vessels passing through the Strait of Hormuz, another sign of Tehran’s control over the world’s most important maritime energy channel.
Hawkish repricing of US monetary policy expectations and a stronger dollar as yields move higher are among the factors driving gold’s recent pullback, according to Frank Monkam, head of cross-asset macro strategy and trading at Buffalo Bayou Commodities.
More critically, gold’s price moves are being exacerbated by deleveraging among retail investors alongside selling from emerging-market players — including central banks — that are liquidating bullion to shore up foreign exchange reserves amid elevated oil prices, said Monkam.
A similar pattern followed Russia’s invasion of Ukraine in early 2022, when an initial spike in the safe-haven commodity was followed by a months-long decline as an energy price shock rippled through markets and added to inflationary pressures.
On Tuesday, Bloomberg reported that Turkey’s central bank had discussed conducting gold-for-foreign currency swap transactions in the London market, potentially to defend the lira against volatility linked to the Iran conflict.
Although bullion has declined in recent weeks, it had previously been on a prolonged rally underpinned by factors including geopolitical and trade tensions, as well as strong central bank purchases. Some bullion-accumulating countries are energy importers, meaning a rising oil and gas bill as a result of the war leaves fewer dollars available to be recycled into gold.
Spot gold rose 1.3% to $4464.95 an ounce as of 4:49 p.m. in New York. Silver also advanced while platinum gained and palladium fell. The Bloomberg Dollar Spot Index rose 0.3%.
Source : Bloomberg
