Gold steady as West Asia talks weigh on interest rate outlook
The US and Iran both signalled that negotiations to restore shipping through the Strait of Hormuz were ongoing, raising hopes for a pickup in supply that would soften energy-driven inflation
Gold prices hovered around $4,050 an ounce as traders kept a watchful eye on Middle East negotiations, which could alleviate pressure on the US Federal Reserve to raise interest rates. The US and Iran reportedly engaged in talks to restore shipping through the Strait of Hormuz, potentially boosting supply and easing energy-driven inflation.
However, Iran denied the discussions, while Oman claimed progress with talks to clear the strait. Federal Reserve Bank of New York President John Williams stated on Monday that interest rates remain appropriate, as inflation should decrease in the second half of the year. Despite the Fed leaving rates unchanged last week at 3.5% to 3.75%, Citi Research analysts predicted gold prices could stagnate or possibly fall to $4,500 an ounce in the fourth quarter.
Their optimism hinges on the resolution of the US-Iran conflict, normalization of Hormuz flows, and a weaker dollar. Gold's valuation has plummeted by over 20% since the onset of the US-Iran war, driven by high energy prices and inflationary pressures, which could hinder precious metals' performance. Spot gold remained steady at $4,052.81 an ounce as of 7:20 a.m. Singapore time, while silver and platinum and palladium also experienced minor declines. The Bloomberg Dollar Spot Index remained flat after closing lower in the previous session.
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