Gold Rises, Dollar Weakens After US-Iran Ceasefire
Gold prices (XAU/USD) continued their gains for the second consecutive day in Asian trading on Wednesday, as a combination of sentiments supported the precious metal. Gold briefly touched a nearly three-week high before retreating slightly, but is still trading around US$4,800, up around 2.0% today.
Gold's gains came amid a weakening US dollar, with the dollar index (DXY) falling to its lowest level in nearly a month after markets responded to news of a two-week ceasefire between the United States and Iran. The dollar's decline increased gold's appeal, as the price of this precious metal tends to move inversely to the greenback.
US President Donald Trump stated that he would suspend previously planned military strikes against Iran for two weeks, provided Tehran agrees to a full, immediate, and safe opening of the Strait of Hormuz. Iran reportedly accepted the two-week ceasefire, with negotiations scheduled to begin Friday in Islamabad, Pakistan, which helped improve risk sentiment but also pressured the dollar's position as a defensive asset. From Iran's perspective, Foreign Minister Seyed Abbas Araghchi announced that safe passage through the Strait of Hormuz would be possible for two weeks. This statement triggered a sharp drop in crude oil prices, which the market then interpreted as a factor that could ease inflation concerns in the near term.
The easing of inflationary pressures reduced speculation of a Federal Reserve interest rate hike, thereby also suppressing US government bond yields. The decline in yields reduced the opportunity cost of holding non-yielding gold, providing additional support for XAU/USD.
Although the short-term bias appears positive, the market is still monitoring whether further buying will emerge to confirm the continuation of the trend. Developments in the implementation of the ceasefire, dynamics in the Strait of Hormuz, dollar movements and yields, and changes in Fed policy expectations are key factors that could determine the scope for further upside.
5 Key Points:
- Gold rose for two consecutive days and held around US$4,800, up about 2% today.
- The DXY weakened to its lowest in almost a month following news of the US-Iran ceasefire.
- The two-week ceasefire is linked to the conditions for opening the Strait of Hormuz and continued negotiations in Islamabad.
- Falling oil prices helped ease inflation concerns and dampened expectations of a Fed rate hike.
- Falling US yields strengthened support for gold, but the market awaits further confirmation of buying flows. (asd)
Source: Newsmaker.id
