Gold prices climbed more than 2% on Wednesday after U.S. President Donald Trump indicated a possible
peace deal may be reached with Iran, sending the dollar and
crude lower as inflation concerns ebbed somewhat.
Spot gold jumped 2.7% to $4,680.91 per ounce, as of
0811 GMT, having hit its highest since April 28. U.S. gold
futures for June delivery rose 2.7% to $4,693.20.
US President Donald Trump said on Tuesday he would briefly
pause an operation to help escort ships through the Strait of
Hormuz, citing progress toward a comprehensive agreement with
Iran.
Iran will only accept “a fair and comprehensive agreement”
in its negotiations with the U.S. on ending the war in the
Middle East, its foreign minister said on Wednesday.
Gold gained as “oil prices retreated on reduction in
geopolitical risk premium, after the U.S. confirmed that the
ongoing fragile ceasefire between Iran is still intact, despite
the skirmish that was seen at the start of this week,” Kelvin
Wong, a senior market analyst at OANDA, said.
“Any signs of re-escalation of tension between the two of
them, you will see gold prices seeing some form of
profit-taking, or for short-term speculators to unwind their
near-term net long position in gold,” Wong added.
A weaker U.S. currency makes dollar-priced metals cheaper
for holders of other currencies.
Elevated crude oil prices can stoke inflation, increasing
the likelihood of higher interest rates. While gold is
considered an inflation hedge, high interest rates make
yield-bearing assets more attractive, weighing on its appeal.
Investors await U.S. non-farm payrolls later this week which
will test whether the economy remains resilient enough to keep
the Federal Reserve’s monetary policy on hold.
“Factors such as economic growth risks, worsening
geopolitical relations, currency volatility and downside risks
to equity markets will continue to support gold’s role as a
portfolio diversifier,” ANZ said in a note.
Spot silver rose 4.6% to $76.16 per ounce, platinum
gained 2.9% to $2,009.25 and palladium was up 2.4%
at $1,521.50.