Gold rises as Trump touts progress with Iran and dollar falls

[SINGAPORE] Gold extended gains after US President Donald Trump touted progress on a final agreement with Iran, reducing inflationary pressure and sending the US dollar lower.

Bullion rose to around US$4,590 an ounce, after moving 0.8 per cent higher on Tuesday (May 5). A gauge of the US dollar declined 0.2 per cent, making gold cheaper for many buyers. Trump in a social media post said that “great progress” has been made with Iran and that he would pause a US-led effort to help stranded ships exit the Strait of Hormuz to see whether or not an agreement can be finalised.

US Defense Secretary Pete Hegseth said the truce that began just under a month ago was holding, while Secretary of State Marco Rubio said that offensive operations are over as Washington shifts to protecting shipping in the strait. Iranian Foreign Minister Abbas Araghchi said talks were “making progress”.

While the US downplayed the prospect of a return to active war, reports a cargo vessel was hit by an unknown projectile the day after clashes involving ships in the Strait of Hormuz signal a continued simmering of tensions.

With the pathway to a deal that reopens the strait remaining opaque, gold remains under near-term pressure as inflationary concerns raise expectations for Federal Reserve rate hikes, which would weigh on non-yielding bullion.

Bond traders are boosting wagers that the central bank’s next policy move could be an increase rather than a cut. Bullion has fallen more than 12 per cent since the war began in late February.

Expectations for a hike are gaining traction ahead of the US employment report, which could show conditions in the labour market are stabilising, allowing inflation risks to take centre stage among investor concerns.

Precious metals are entering summer with a “structural positioning paradox”, Nicky Shiels, head of research and metals strategy at trader MKS PAMP, said in a note. The notional amount of money invested in gold remains crowded, but positioning remains light in terms of contracts and ounces.

“The medium-term bull case on debasement, supply chain fragmentation, and monetary order breakdown remains intact,” she said. “But the near-term path to new highs requires generalist institutional capital to step in and fill a vacuum that seasonal patterns and exhausted retail cannot.”

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Spot gold rose 0.8 per cent to US$4,593.11 an ounce as at 8.18 am in Singapore. Silver was 1.3 per cent higher at US$73.79. Platinum and palladium advanced. BLOOMBERG