Gold steadies as Trump extends Iran ceasefire, peace talks stall

[SINGAPORE] Gold held a two-day decline after US President Donald Trump extended a ceasefire with Iran and plans for a fresh round of peace talks fell apart.

Bullion was near US$4,720 an ounce in early trading, after falling more than 2 per cent in the previous session. Trump said that he would hold off on further strikes until Iran submits a new proposal “and discussions are concluded, one way or the other”.

Meanwhile, the Strait of Hormuz remains closed to shipping, with Iran saying it will not reopen the vital waterway while the US maintains its own blockade of vessels coming to and from the Islamic Republic.

Oil held gains on Wednesday (Apr 22), while a gauge of the US dollar ended the previous session up 0.4 per cent, pressuring gold that’s priced in the US currency. Now in its eighth week, the war has triggered an unprecedented energy-supply shock that has heightened inflationary risks, making central banks more likely to hold interest rates steady or even raise them, a headwind for non-yielding bullion.

Gold has lost more than 10 per cent since the conflict began but in recent weeks has moved within a relatively narrow range. That’s a sign that the market “has largely priced in the current level of geopolitical risk and is now demanding either a clear escalation, or a decisive shift in macro conditions to justify a re-rating”, said Ahmad Assiri, an analyst at Pepperstone Group.

Bullion was also weighed down by Kevin Warsh’s pledge to act independently if confirmed as the next US Federal Reserve chair. In testimony before the Senate Banking Committee on Tuesday, Trump’s pick to lead the US central bank said that a new framework was needed to deal with persistent inflation, without being more specific.

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Gold steadies as traders weigh next round of US-Iran peace talks

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Investors expect Warsh, known for his hawkish stance on inflation, to pursue a measured approach to lowering borrowing costs rather than the more aggressive rate cuts urged by Trump.

Spot gold edged 0.1 per cent higher to US$4,723.70 an ounce at 7.08 am Singapore time. Silver rose 0.3 per cent to US$76.96 an ounce, while platinum and palladium were little changed. The Bloomberg Dollar Spot Index was down 0.1 per cent. BLOOMBERG