Gold prices maintained their downward momentum for the second consecutive session after US President Donald Trump extended the ceasefire with Iran, while plans to resume new peace talks collapsed.
The precious metal traded around 4,720 USD/ounce in the first session of the day, after falling more than 2% in the previous session. Mr. Trump said he would postpone the attacks until Iran makes a new proposal "and the discussions are concluded in one way or another". Meanwhile, the Strait of Hormuz remains closed to transportation, as Iran declares it will not reopen this strategic shipping route as long as the US maintains blockades of ships entering and leaving the country.
Oil prices maintained their upward momentum in Wednesday's session, while the USD index rose 0.4% in the previous session, putting pressure on gold - an asset valued in the greenback. Stepping into the eighth week, the conflict caused an unprecedented energy supply shock, increasing the risk of inflation and causing central banks to tend to maintain high interest rates or even raise interest rates - a disadvantage for gold, which is an unprofitable asset.
Gold prices have fallen more than 10% since the conflict broke out, but in recent weeks have mainly fluctuated in a narrow range. According to Mr. Ahmad Assiri - an analyst at Pepperstone Group, this shows that the market "has largely reflected the current level of geopolitical risk and is waiting for a clear escalation or a decisive change in macroeconomic conditions to re-establish the trend".
Gold prices are also under pressure after Mr. Kevin Warsh pledged to act independently if approved as Chairman of the US Federal Reserve (Fed). In a hearing before the Senate Banking Committee on Tuesday, the candidate nominated by President Donald Trump said that a new policy framework is needed to deal with persistent inflation, although he has not provided specific details.
Investors expect Mr. Warsh - who has a "hawkish" view of inflation - to pursue a cautious interest rate cut roadmap, instead of a sharp cut as proposed by Mr. Trump.
Spot gold prices slightly decreased by 0.5% to 4,756.69 USD/ounce at 9:32 am Vietnam time. Silver prices increased by 0.3% to 76.96 USD/ounce, while platinum and palladium were almost flat. The Bloomberg Dollar Spot Index decreased by 0.1%.
