Gold rises over 1% on US-Iran talks optimism

Gold prices rose by more than 1% in European markets on Tuesday, on their way toward recording the highest level in several weeks, supported by the broad decline in U.S. dollar levels in the foreign exchange market, which comes after a breakthrough in negotiations between the United States and Iran, despite the naval blockade that the U.S. Navy began implementing on the Strait of Hormuz and Iranian ports.

With the current slowdown in global oil prices, concerns of accelerating global inflation are receding, reducing pressure on the Federal Reserve to raise interest rates in the near term.

Price overview

• Gold prices today: Gold metal prices rose by 1.2% to ($4,796.42), from the opening level of trading at ($4,741.03), and recorded a low of ($4,741.03).

• Upon price settlement on Monday, gold prices lost 0.2%, in the second consecutive daily loss, due to correction and profit-taking operations from a three-week high at $4,857.56 per ounce.

The U.S. Dollar

The dollar index fell on Tuesday by 0.25%, deepening its losses for the seventh consecutive session and recording a six-week low, reflecting the continued drop in the levels of the American currency against a basket of global currencies.

As we know, the drop in the levels of the American currency makes gold bullion priced in U.S. dollars more attractive to buyers holding other currencies.

This drop comes amid improved risk sentiment in the markets after media reports confirmed the continuation of negotiations between the United States and Iran regarding reaching a lasting peace agreement in the Middle East.

Diplomatic efforts

Diplomatic efforts continue, sponsored by Pakistan and Turkey, to bring viewpoints closer between the United States and Iran and to push toward engaging in a new round of negotiations, following the stumbling of the previous round held in the Pakistani capital, Islamabad, on Friday.

Media reports confirmed that a new round of negotiations between Washington and Tehran may be held in Islamabad next Thursday, with the Swiss capital, Geneva, proposed as a potential alternative for the second round of U.S.-Iranian negotiations.

Keiichi Iguchi, senior strategist at Resona Holdings, said: The series of statements has created some relief in the markets, as it renewed the possibility of reaching a diplomatic solution.

Global oil prices

Global oil prices fell by an average of 1%, with signs appearing that Washington and Tehran may revive peace talks after the United States began a blockade of the Strait of Hormuz.

U.S. interest rates

• After the decline in oil prices and according to the "FedWatch" tool of the CME Group: pricing of the probability of keeping U.S. interest rates unchanged at the April meeting rose from 96% to 99%, and pricing of the probability of raising interest rates by about 25 basis points fell from 4% to 1%.

• In order to re-price those probabilities, investors are closely following the release of more economic data from the United States.

Gold performance expectations

Phillip Streible, chief market analyst at Blue Line Futures, said: The market is heavily influenced by news. Eyes are on the price of crude oil because it will directly affect inflation, and this in turn will affect Federal Reserve policy.

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, decreased on Monday by about 5.23 metric tons, bringing the total down to 1,047.19 metric tons, which is the lowest level since March 30.