Gold rises ahead of US-Iran talks

Gold prices rose in European trading on Wednesday, moving back into positive territory, supported by a weaker US dollar and declining oil prices, as investors monitored signs of progress in peace negotiations between the United States and Iran.

Lower oil prices are easing inflation concerns in the United States, reducing pressure on Federal Reserve policymakers and lowering the probability of additional US interest rate hikes before the end of this year.

Price Overview

• Gold prices today: Gold prices rose 0.45% to $4,527.97, from the opening level at $4,507.98, and recorded a low of $4,485.94.

• At Tuesday’s settlement, gold prices lost 1.4%, marking the third loss in the past four sessions, following US strikes on Iran.

US dollar

The dollar index fell 0.1% on Wednesday, heading toward its second loss in the past three sessions, reflecting weaker performance of the US currency against a basket of global currencies.

The decline comes as investors maintain optimism over continued progress in peace talks between the United States and Iran amid intensive diplomatic efforts to resolve the remaining points of disagreement between the two sides.

Global oil prices

Global oil prices fell by more than 2% on Wednesday, resuming losses that had temporarily paused yesterday and moving back near five-week lows amid hopes that the Strait of Hormuz could reopen to oil tankers.

Latest developments in the Iranian war

• Iran said the latest US strikes violate the ceasefire agreement.

• A possible preliminary agreement to permanently end the war could pave the way for further negotiations.

• US Secretary of State Marco Rubio said an agreement with Iran could take a few days.

• Both sides had previously indicated progress toward a preliminary agreement to end hostilities and resume shipping through the strait.

US interest rates

• According to the CME Group’s FedWatch tool, markets are currently pricing in a 56% probability that the Federal Reserve will raise interest rates in December, compared to just over 16% at the beginning of May.

• Markets are currently pricing a 99% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate hike stands at 1%.

• Investors are closely monitoring additional US economic data, along with comments from Federal Reserve officials, in order to reassess those expectations.

Gold outlook

Market strategist Ilya Spivak said: “The broader trend appears bearish, but we are seeing extended periods of consolidation, and I believe that is what we are witnessing today.”

Spivak added that inflation risks and bond market volatility have become so significant that they have shifted attention away from gold’s yield dynamics, meaning gold prices could fall to between $3,700 and $3,800 by the end of the year if the current trend continues.

SPDR Fund

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained virtually unchanged on Tuesday for the second consecutive session, keeping total holdings at 1,034.85 metric tons, the lowest level since May 8.