Geopolitical Tensions Ease, Gold Gains Momentarily!
Gold prices rose after signs emerged that the United States and Iran were nearing a deal that could potentially ease the risk of disruptions in the Strait of Hormuz. This development is seen as alleviating inflation concerns previously triggered by surging energy prices.
Spot gold rose 1.5% to US$4,575.30 per ounce at 8:11 a.m. in Singapore, erasing last week's modest decline. The rise coincided with a 0.2% decline in the Bloomberg Dollar Spot Index, which generally supports precious metal prices.
According to US officials speaking to reporters on Sunday, negotiations are still in the process of drafting the language of the agreement and it could take several days to reach a final agreement from both sides. President Donald Trump said he would not "rush" into reaching a deal, while US Secretary of State Marco Rubio suggested there was the possibility of "good news" regarding Hormuz in the coming hours.
However, the market response was not yet aggressive. Global X ETFs analyst in Sydney, Justin Lin, said gold's reaction to headlines remains "relatively muted" because the market has seen several announcements from Trump fail to yield concrete results, so investors are still waiting for more concrete evidence of cooperation before lowering inflation expectations.
From a fundamental perspective, gold remains pressured by rising expectations of monetary policy tightening. Since the conflict began in late February, gold has reportedly fallen by around 13%, while money markets are increasingly pricing in the possibility of the Fed starting to raise interest rates in December, as the Iran war pushes up energy prices and intensifies inflationary pressures. Higher interest rates tend to weigh on gold because it offers no yield.
Investor attention is also focused on the direction of the Fed's policy under new Chairman Kevin Warsh, particularly regarding his assessment of economic conditions and inflation. In other metals markets, silver rose 4% to US$78.53, while platinum and palladium also strengthened—following shifts in risk sentiment and dollar movements. (asd)*
Source: Newsmaker.id
