Gold rises over 2% after US, Iran reach peace deal
US and Iran will sign a memorandum of understanding in Switzerland on Jun 19
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GOLD rose 2 per cent on Monday (Jun 15) after US and Iran officials said that they had reached a preliminary deal to end their conflict, pushing oil prices lower and easing concerns about inflation and higher interest rates.
Spot gold climbed 2.5 per cent to US$4,322.87 per ounce by 0312 GMT, hitting its highest level since Jun 9 and extending gains for a third straight session. US gold futures for August delivery rose 2.5 per cent to US$4,344.80.
US and Iranian officials said on Sunday that they had agreed on a framework to end their war, halt the US blockade of Iran and reopen the Strait of Hormuz.
The pact will be officially signed on Friday in Switzerland, Pakistani Prime Minister Shehbaz Sharif said.
The US dollar fell to a 10-day low, making greenback-priced bullion cheaper for other currency holders, while oil prices slipped more than 4 per cent.
“Lower oil prices and a softer dollar, stemming from reduced geopolitical risk and the anticipated reopening of the Strait of Hormuz, are helping to calm inflation expectations,” said Tim Waterer, chief market analyst at KCM Trade.
“This combination is providing the precious metal with its best tailwind in recent weeks, though sustainability will depend on how durable the peace agreement proves to be.”
Gold prices have fallen about 20 per cent since the start of the US-Israeli war against Iran in late February. The effective closure of the Strait of Hormuz has led to a sharp increase in global oil prices, stoking inflation concerns and raising expectations of interest rates staying higher for longer.
Bullion loses appeal in a high-interest-rate environment as it is a non-yielding asset.
Markets have scaled back expectations for a US interest rate hike in December to 47 per cent after the peace deal, down from 69 per cent last week, according to the CME FedWatch tool.
Investors now await the US Federal Reserve policy decision and remarks, the first under chair Kevin Warsh, on Jun 17, with rates widely expected to remain unchanged.
“Currency debasement concerns, fiscal risks and ongoing geopolitical fragmentation continue to underpin long-term demand (for gold). A moderation in energy-led inflation could help these themes regain traction,” OCBC said.
Spot silver rose 3.6 per cent to US$70.39 per ounce, platinum gained 3.3 per cent to US$1,773.70 and palladium climbed 3.3 per cent to US$1,324.75. REUTERS
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