Gold moves in a positive zone on US-Iran talks updates

Gold prices rose in European trading on Thursday, remaining in positive territory for a second consecutive day as the metal continued recovering from its lowest level in nearly two months, supported by a weaker US dollar against a basket of currencies amid growing optimism over a possible peace agreement between the United States and Iran.

Expectations for at least one US interest rate hike this year have also increased, especially after the release of the minutes from the latest Federal Reserve policy meeting, which showed policymakers remain open to raising rates further.

Price overview

• Gold prices today: Gold rose 0.65% to $4,570.93 per ounce, from an opening level of $4,542.23, after touching an intraday low of $4,512.06.

• At Wednesday’s settlement, gold gained 1.4%, after earlier falling to a two-month low of $4,453.60 per ounce.

The US dollar

The US Dollar Index fell 0.1% on Thursday, extending losses for a second consecutive session and moving further away from its highest levels in a month and a half, reflecting continued weakness in the US currency against a basket of global currencies.

Beyond profit-taking activity, the dollar weakened as optimism increased over Washington nearing an agreement with Tehran to end the war in the Middle East.

Developments in the US-Iran negotiations

• Trump: The United States is in the final stages of negotiations with Iran.

• Trump said he is prepared to wait a few days for the “right answer” regarding a peace agreement with Iran.

• Iran’s Foreign Ministry officially announced that it is currently reviewing the latest response and proposals received from Washington through the Pakistani mediator.

• Sources: A new round of US-Iran peace negotiations will be held in Islamabad after the Hajj season.

• Pakistan’s army chief may visit Iran today, Thursday, to announce the final draft of the agreement.

US interest rates

• Minutes from the Federal Reserve’s April meeting showed that most policymakers believe “some additional tightening in monetary policy may become appropriate” if inflation remains above the central bank’s 2% target.

• Kevin Warsh will be sworn in as Chairman of the Federal Reserve on Friday.

• According to CME’s FedWatch Tool, markets are currently pricing in a 40% probability that the Federal Reserve will raise interest rates in December, compared to just above 16% at the beginning of May.

• Markets continue to price a 99% probability that interest rates will remain unchanged at the June meeting, while the probability of a 25-basis-point rate cut stands at only 1%.

• To reassess these expectations, investors are closely monitoring upcoming US economic data as well as comments from Federal Reserve officials.

Gold outlook

Kelvin Wong, Senior Market Analyst for Asia-Pacific at OANDA, said sentiment improved “after Trump’s remarks indicating that the United States and Iran are approaching the final stages of a peace agreement.”

Wong added: “The broader trend in the US 10-year Treasury yield has remained moderately bullish since early March. Therefore, gold bulls may not be overly enthusiastic about pushing prices significantly higher at this stage.”

SPDR Gold Trust

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained essentially unchanged on Wednesday, with total holdings steady at 1,036.85 metric tons, the lowest level in a week.