Gold steady as US-Iran signals keep rate hike bets simmering

[MELBOURNE] Gold moved in a narrow range as conflicting signals on the progress of US-Iran ceasefire talks continued to keep traders guessing over whether central banks may need to keep interest rates higher for longer to combat inflation.

Bullion was trading around US$4,540 an ounce, little changed from a week earlier. Teheran is in the process of responding to a text submitted by the US, which “has narrowed the gaps to some extent”, the semi-official Iranian Students’ News Agency reported on Thursday (May 21), without saying where it got the information.

While that signalled progress, a Reuters report that Supreme Leader Mojtaba Khamenei issued a directive that the country’s near-weapons-grade uranium should not be sent abroad initially sent oil prices higher. Then US President Donald Trump said that he opposed efforts by Iran and Oman to establish some form of permanent toll system through Hormuz.

The conflicting statements on key issues left it unclear if the two sides were any closer to a deal.

For gold traders, this means concerns continue to simmer that the US Federal Reserve and other central banks may have to hike rates to contain inflation fuelled by rising energy costs. Bullion typically performs well in a lower-rate environment, since the metal pays no interest.

The impasse has seen gold and other precious metals lose their lustre with commodity trading advisers, TD Securities strategists, including Ryan McKay, said. “Our latest pricing scenarios highlight the potential for CTAs to shed nearly all of their net length in the yellow metal in a large downtape scenario towards US$4,350 an ounce,” they added.

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Gold steadies as hopes of US-Iran truce ease rate-hike bets

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Gold has traded in a tight range since falling sharply in the early days of the conflict, as investors weigh higher rates against the prospect of a high-inflation, low-growth scenario. Bullion is down nearly 14 per cent since the war erupted in late February.

Spot gold was down 0.1 per cent at US$4,537.43 an ounce at 7.40 am in Singapore. Silver was 0.1 per cent lower at US$76.61. Platinum and palladium were little changed. The Bloomberg Dollar Spot Index, a gauge of the US currency, was also steady. BLOOMBERG