Gold price rebounds on US-Iran deal hopes

Gold bounced back on Wednesday to approach a two-week high, as optimism over a US-Iran peace deal eased concerns over inflation and an extended period of high interest rates.

Spot gold prices surged by the most in nearly a month, rising as much as 3.6% to surpass $4,700 an ounce. Three-month gold futures saw similar gains, trading at about $4,710 in New York. Silver, too, rose by more than 6% to almost $78 per ounce.

The rebound follows reports that the US and Iran are nearing an agreement to end the war in ‌the Gulf, which has sent energy prices soaring. The inflationary pressures have largely reduced the chances of central banks cutting interest rates, a scenario that benefits non-yielding assets like gold.

During the 10-week-long conflict, bullion has seen its value decline by about 11%, as its traditional role as a safe-haven asset gets overshadowed by the high-rate concerns.

“The optimism about a final deal between the US and Iran has caused at least ‌some short-term relief in gold,” Peter Grant, vice president and senior metals strategist at Zaner Metals, told Reuters. However, he also cautioned that the market can still “pivot on Middle East headlines.”

Inflation concerns ease

According to news outlets including Bloomberg, Iran is currently evaluating a proposal sent by the US. The US will end its military campaign “assuming Iran agrees to give what has been agreed to, which is, perhaps, a big assumption,” US President Donald Trump posted on social media.

“As concerns over rising price pressures were easing, gold investors bet that the Federal Reserve can still move towards rate cuts rather than keeping policy restrictive for longer,” said Ewa Manthey, a commodity strategist at ING Groep NV.

In the near term, investors will look at the series of incoming US data releases, including Friday’s employment report, to gauge the Federal Reserve’s monetary policy.

For the rest of the year, market participants, including those from major banks, are optimistic that gold will rise higher, with or without rate cuts. A key driver is expected to be official-sector purchases of the metal, which according to the World Gold Council, rose last quarter despite some central banks reducing their holdings.

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