Gold prices rose after US President Donald Trump signaled that the war in the Middle East may be about to end, causing the USD and oil prices to fall.
The precious metal at one point increased by 0.9%, surpassing the 5.180 USD/ounce mark, wiping out the decline of the previous session. Mr. Trump said the conflict would be resolved "very soon", while an index measuring the strength of the USD fell by 0.1%, extending the decline from Monday's session. Crude oil prices plummeted more than 10% in the context of the market continuously being "beaten back" by extremely strong trading fluctuations.
Any sign that the White House is ready to end the war with Iran, which has now entered its second week, could help ease pressure on gold. The near-blockade of the Strait of Hormuz, along with Iran's missile attacks on energy infrastructure, has caused oil prices to skyrocket and raised concerns about inflation.
This also reduces the possibility that the US Federal Reserve (Fed) and other central banks will soon cut interest rates. Higher borrowing costs are often a disadvantage for gold because this precious metal does not yield yields. In addition, gold is also used as a source of liquidity when the global stock market plummets during the escalating war.
According to Daniel Ghali - Senior Commodity Strategist at TD Securities, gold holdings are under pressure as the market gradually eliminates expectations of interest rate cuts. In a report, he said there are some signs that traders have "bottom-fished" on the physical gold market trading outside the exchange, but trading volume is still limited and at a fairly normal level.
At a press conference at his resort in Doral, Florida, Mr. Trump also said that the US Navy will escort oil tankers through the Strait of Hormuz, a bottleneck off the coast of Iran where about one-fifth of the world's oil and gas must pass through. However, the US President did not give specific details about this plan and also said he did not expect the conflict to end this week.
Although trading on the market is quite volatile and the upward momentum has stalled, gold prices have still increased by about one-fifth since the beginning of the year. Fluctuations in global trade and geopolitical policies under Mr. Trump, along with pressures related to the Fed's independence, have supported safe-haven assets.
Spot gold prices rose 0.9% to $5,170.87/ounce at 1 am in Singapore. Silver prices rose 2.9% to $89.49/ounce. Platinum rose while palladium fell. The Bloomberg Dollar Spot index fell 0.1% after falling 0.2% in the previous session.
