Gold Soars to the Sky! Trump-Iran Ceasefire: What's Next?
Gold prices rose after US President Donald Trump and Iran agreed to a two-week ceasefire to finalize talks to end the war that had shaken global markets. In a social media post, Trump stated that the pause in bombing was linked to a key condition: the reopening of shipping lanes in the Strait of Hormuz.
Bullion rose by around 3.1% and briefly moved above US$4,850 per troy ounce, extending the 1.2% gain in the previous session. This movement marked a rapid shift in risk sentiment, as the market assessed that the chances of prolonged disruption were decreasing, although permits had not yet been completely eliminated.
Across assets, the drop in oil prices to below US$100 per barrel and the weakening US dollar also supported gold, priced in that currency. At the same time, the stock market surged more than 2%, indicating a strong "risk-on" response following the ceasefire news, while also changing the demand landscape for hedging assets.
However, gold's dynamics in this conflict do not entirely follow the classic safe haven pattern. Since the Middle East war began, gold has occasionally moved in line with stocks, as some investors sought to cover losses in other assets. Pepperstone Group Ltd. strategist Ahmad Assiri believes that gold's surge past US$4,800 reflects more of a "risk recalibration" than a full-blown regime change, leaving the market with a discount compared to pre-conflict conditions related to Iran.
On the fundamental monetary policy front, the conflict, which is entering its sixth week, has triggered rising energy prices and heightened inflation risks. This situation has the potential to encourage central banks to delay interest rate cuts, even opening up room for tightening, which is generally a holding factor for gold because it does not provide disproportionate returns. Currently, bond market participants are said to be expecting the Fed to hold rates until the end of the year, increasing pressure on the opportunity cost of holding gold.
Nevertheless, gold is still down nearly 10% since the war began in late February, and the modest recovery in recent days is attributed to hopes for a ceasefire and expectations of slowing global growth, which could offset the view that interest rates remain high. Assiri emphasized that gold remains highly sensitive to political developments; The ceasefire provides some respite, but it's fragile, and any sign of a rift—especially regarding the Strait of Hormuz—has the potential to reignite volatility. As of the latest price update, spot gold was around US$4,849.01 per troy ounce (8:02 a.m. in Singapore), while the Bloomberg Dollar Index weakened 0.8%; silver rose 5.4% to US$76.92, with platinum and palladium also gaining.
5 key points:
- Gold rallied by around 3.1% and briefly surpassed US$4,850 after the Trump-Iran two-week ceasefire was announced.
- Strait of Hormuz risks are key; Iran stated that safe passage "may" be available for two weeks.
- Oil fell below US$100 and the dollar weakened, a combination that supports gold's rise.
- Inflationary risks from energy emissions diminish the chances of an interest rate cut; bond market expectations that the Fed will hold rates until the end of the year are a drag on gold.
- Gold's movement is considered more of a risk adjustment (rather than a major trend change), so it remains vulnerable to political news and the potential for a ceasefire to break. (asd)
Source: Newsmaker.id
