Gold price pares gains as traders assess progress on war truce

Gold trimmed gains as traders weighed the progress on a truce deal between the US and Iran, despite the effective closure of the strategic Strait of Hormuz.

Bullion gave up most early gains after the semi-official Iranian Students’ News Agency reported that Iran’s planned Hormuz toll will be paid via Iranian banks, injecting further uncertainty to the situation in the Middle East. Bond yields pushed higher, weighing on gold as it doesn’t pay interest. Oil remained above $93 a barrel while US equities retreated from record highs.

Pakistan stepped up efforts to ensure the US and Iran prolong a ceasefire beyond its official expiry date next week, to allow more time to negotiate a lasting peace deal. Optimism surrounding a ceasefire in the region has been growing in recent days, with many stock exchanges reversing their wartime losses and even hitting record highs. That’s despite extensive damage to Gulf energy infrastructure and the effective halt of the Strait of Hormuz.

Gold will find support from market volatility as long as President Trump is in the White House, ACG Metals Ltd. chairman and chief executive officer Artem Volynets told Bloomberg TV. Recent geopolitical events may spur central bank gold-buying as they shift away from the US dollar, he said.

The swap market is still betting that the US Federal Reserve will hold rates steady this year, a view supported by comments from Fed Bank of St. Louis president Alberto Musalem and Fed Bank of Cleveland president Beth Hammack.

“Given the fragile ceasefire and switch to focus on real yields, gold is not yet out of the woods,” Suki Cooper, global head of commodities research at Standard Chartered Plc, wrote in a note. With the competing risks of inflation and slower growth, “the policy response will be key,” she said, as gold “transitions away from moving in-step with risk assets.”

Gold has fallen about 9% since the start of the war, with a liquidity squeeze in the early weeks of fighting leading investors to offload holdings and cover losses elsewhere. In a sign that buyers are coming back to the market, bullion-backed exchange-traded funds have added around 25 tons so far this month, after cutting around 94 tons in March, according to a Bloomberg tally.

Spot gold was 0.3% higher at $4,805.30 an ounce at 11:30 a.m. in New York. Silver and platinum slipped, while palladium rose. The Bloomberg Dollar Spot Index was up 0.1%.

Copper traded on the London Metal Exchange rose 0.2% to $13,278 a ton. Other base metals except lead were higher.

(By Yihui Xie, Preeti Soni and Yvonne Yue Li)