Gold prices went sideways after two consecutive declining sessions, as the focus of the market remained on negotiations between the US and Iran, in the context of the Hormuz Strait continuing to be closed indefinitely, increasing the risk of inflation.
The precious metal traded around 4,590 USD/ounce, after falling 2.4% in the previous two sessions to a nearly four-week low. President Donald Trump said Iran has asked the US to lift the naval blockade in the Strait of Hormuz while the two sides are negotiating to end the two-month war, which has disrupted global energy supplies. Intermediaries in Pakistan expect Iran to make amendments in the next few days, according to CNN.
Traders are closely monitoring the interest rate decisions of the US, European Union, UK and Canada in the coming days. Previously, the Bank of Japan (BOJ) had kept the base interest rate unchanged at 0.75%, although the divisive voting results showed that the possibility of raising interest rates in June is increasing.
The US Federal Reserve (Fed) is widely predicted to keep interest rates unchanged after the meeting ends on Wednesday, according to Bloomberg Economics. Investors are also interested in whether Jerome Powell will continue to participate in the board after his term as Chairman ends.
The risk of inflation is increasing due to the energy supply shock, increasing the possibility that central banks will maintain high interest rates for longer or even continue to raise interest rates – a disadvantage to gold, which is a non-performing asset. At the same time, rising bond yields also increase the opportunity cost when holding precious metals. Since the conflict broke out at the end of February, gold prices have fallen by about 13%, while crude oil prices have increased sharply.
Some technical selling activities have appeared after gold prices broke the recent support zone around 4,650 USD/ounce, said Ole Hansen, Commodity Strategy Director at Saxo Bank. "The short-term focus of the market is still mediation efforts, in which reopening the Strait of Hormuz and leading to a decrease in oil prices will be the biggest supporting factor for the precious metal" - he said.
As of 09:55 Vietnam time, spot gold price decreased by 1.85% to 4,593.10 USD/ounce. Silver price increased by 0.1% to 73.13 USD/ounce, while platinum and palladium remained almost unchanged. Bloomberg Dollar Spot index - a measure of USD strength - is sideways.
