Gold Strengthens, Limited Lebanon Ceasefire Pressures Dollar
Gold (XAU/USD) maintained modest intraday gains through the first half of the European session on Tuesday (June 2nd), but failed to gain further buying momentum and remained stuck below the previous day's peak. The market assessed that the easing risk of regional escalation provided room for recovery, but uncertainty surrounding US-Iran diplomacy kept the direction fragile.
Initial support came after a partial ceasefire between Hezbollah and Israel eased fears of a broader conflict in the Middle East. This reduced safe-haven demand for the US dollar, thus boosting bullion.
US President Donald Trump said Israel had agreed to withdraw troops that were preparing to attack Beirut and Hezbollah-controlled suburbs. Trump also stated that he had communicated through intermediaries and obtained a commitment that Hezbollah would not attack Israel, but the limited de-escalation was deemed insufficient to decisively shift market sentiment.
Meanwhile, mixed signals regarding the progress of US-Iran peace talks continued to support the dollar. Iran warned it would suspend negotiations following Israel's latest attack and military operation in Lebanon, while Trump asserted that talks were ongoing and left open the possibility of an agreement to extend the ceasefire and reopen the Strait of Hormuz within the next week.
For gold, the main tug-of-war lies in two channels. De-escalation reduces the need for hedging, but uncertainty surrounding the negotiations keeps the risk premium alive. At the same time, inflation concerns related to energy prices and the prospect of rising interest rates have the potential to restrain further dollar weakness, while limiting gold's upside, as the precious metal offers no yield.
The market's next focus will be on the release of US JOLTS Job Openings in the North American session, with the primary focus remaining on Friday's Nonfarm Payrolls (NFP) report. Beyond the data, developments surrounding US-Iran negotiations, conflict dynamics in the Middle East, and energy price movements are key variables that could further shift the direction of the dollar and gold.
Source: Newsmaker.id
