Gold prices gained as US President Donald Trump announced fresh negotiations with Iran, raising hopes for a breakthrough in the months-long conflict and potentially easing energy-driven inflation. Spot gold rose 0.6% to $4,069.34 an ounce as of 8:30 a.m. in Singapore, while silver gained 0.9% to $58.10 an ounce. Platinum and palladium also advanced, and the Bloomberg Dollar Spot Index was 0.3% lower.
Bullion received a "second relief card" and is consolidating "after Trump delayed strikes on Iran over the weekend" and "following the soft hawkish tone" from the Fed last week, according to Ahmad Assiri, market strategist at Pepperstone Group Ltd. Gold had seen out July with a 1% gain, its first monthly increase since February, supported by bargain buying and easing military tensions.
Traders are also closely monitoring the Federal Reserve’s next steps. The New York Times reported Chairman Kevin Warsh as saying he was considering reducing the frequency of policy meetings, which would mark a significant shift for the US central bank. The Fed currently meets eight times a year and recently voted 9-3 to hold interest rates steady. Gold is down by more than a fifth since the US-Iran war began more than five months ago, with high energy prices stoking inflationary pressures and raising the likelihood that interest rates will stay higher for longer, which is a headwind for precious metals that don’t pay interest.
Despite the immediate gains, market strategist Assiri noted that "Yields are grinding higher, resulting in marginal pressure on gold’s appeal, but this correlation is somewhat still moderate." He warned that "Iran-related turbulence is likely to move the needle to the downside during the week if regional diplomacy doesn’t result in a positive outcome."
