Gold prices held steady around $4,050 an ounce, as investors focused on ongoing diplomatic efforts to ease tensions between the US and Iran. The potential for a resolution in the Middle East conflict could lead to lower energy prices and reduce pressure on the Federal Reserve to raise interest rates. Citi Research analysts, including Kenny Hu, predict that gold could stagnate or even decline in the next month before rallying to $4,500 an ounce in the fourth quarter, contingent on the US-Iran conflict ending and normalized shipping flows through the Strait of Hormuz.
Despite the ongoing conflict, which has seen gold decline by over a fifth since late February due to high energy prices and inflation concerns, the Fed opted to keep interest rates unchanged last week. However, three officials dissented in favor of a rate hike. New York Fed President John Williams indicated that interest rates are currently well-positioned, anticipating inflation to ease in the second half of the year, but stated the central bank would act if inflation doesn't behave as expected. Higher energy prices from the conflict reinforce expectations of the Fed maintaining higher rates for longer.
Goldman Sachs Group Inc. analysts, including Daan Struyven, believe that re-accelerating central-bank gold demand, especially from China, should help gold prices rebound despite potential temporary downward pressure from energy and rates markets. Spot gold was down 0.1% at $4,050.27 an ounce in London, while silver rose 0.9% to $58.70 an ounce. Platinum and palladium also saw increases. The Bloomberg Dollar Spot Index remained largely unchanged. South Korea's central bank also announced plans to purchase gold from local producers to diversify its supply and increase holdings.
