Gold edges lower as uncertainty clouds talks to end US-Iran war

GOLD edged lower as renewed clashes in the Middle East cast doubt over negotiations between the US and Iran to end the war that’s upended energy flows and heightened inflation concerns.

Bullion fell as much as 0.6 per cent to near US$4,460 an ounce, before paring losses. US President Donald Trump said that he’s optimistic the US can reach an interim peace deal with Teheran soon, disputing reports in Iranian state media that discussions with Washington had been suspended over fighting in Lebanon. Another round of talks between Israel and Lebanon is scheduled for Wednesday.

But there were fresh attacks across the region, with Iran firing ballistic missiles at Kuwait and Bahrain, which broke apart en route or were intercepted, and US forces conducting strikes on the Islamic Republic’s Qeshm Island, US Central Command said. Oil advanced for a third day, with Brent crude trading near US$97 a barrel.

“The Middle East remains a key source of uncertainty, and the flow of headlines continues to influence short-term market sentiment,” said Ahmad Assiri, a market strategist at Pepperstone. “The repeated cycle of re-escalation and de-escalation has created a challenging environment for investors attempting to assess the true level of risk facing gold.”

Bullion has moved largely in an inverse relationship with oil since hostilities broke out in late February. It fell sharply in the early days of the conflict and remains about 15 per cent below its immediate pre-war level, though has traded in a narrow range for the last few weeks.

The metal has “maintained a pattern of lower highs, suggesting underlying sentiment remains fragile”, Assiri said.

The protracted disruption to energy flows via the Strait of Hormuz has raised concerns over global inflation, making central banks more likely to keep rates steady or even raise them, a headwind for precious metals, which do not pay interest.

Bank of England policymaker Megan Greene said that the case for higher borrowing costs is strengthening as the war continues, a sign more officials could join the bank’s chief economist, Huw Pill, in calling for action against inflation.

Meanwhile, US data released on Tuesday showed job openings jumped in April to the highest in almost two years, reinforcing bets that the Federal Reserve will hold interest rates higher for longer. Fed Bank of Cleveland president Beth Hammack said that it’s reasonable to keep borrowing costs steady for now given uncertainties about the economic outlook, but officials may need to act soon to address elevated inflation.

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Gold holds fall as traders digest confusion over US-Iran talks

Spot gold slipped 0.1 per cent to US$4,483.29 an ounce at 11.00 am in Singapore. Silver dropped 0.1 per cent to US$75 an ounce. Platinum was steady and palladium inched up 0.2 per cent. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed. BLOOMBERG