Gold is trading above $4,300 an ounce, with spot gold at $4,341.12 per ounce and US Gold Futures for August delivery at $4,361.10. This marks a fifth consecutive day of gains for spot gold, nearing a one-week high.
Optimism stems from an interim US-Iran peace deal, which is expected to allow Iranian oil sales, potentially easing inflationary pressures and reducing the likelihood of aggressive interest rate hikes. This sentiment has softened the US dollar, making gold more attractive to holders of other currencies.
Investors are closely watching the Federal Reserve's policy announcement today, expecting rates to remain unchanged, but focusing on new Fed Chair Kevin Warsh's press conference for clues on future policy direction. Traders now assign a 59% probability of a US rate increase in December, down from 70% last week, according to the CME FedWatch tool.
Analysts like Ilya Spivak of Tastylive note that the rally in gold is losing steam as attention shifts to the Fed's announcement. Edward Meir of Marex suggests that if Warsh signals potential rate cuts, the dollar could weaken further, leading to another gold rally, while a hawkish stance could pressure gold.
Long-term support for gold is anticipated due to continued Asian demand and central bank purchases as hedges against geopolitical and political risks, according to Westpac analysts. The World Gold Council's survey indicates a record 45% of reserve managers expect to increase their gold holdings over the next year.
