Gold prices rose slightly in Wednesday's trading session as concerns about the risk of prolonged disruptions to oil shipping routes somewhat eased. Investors also assessed the economic impact of the Middle East conflict in the context of a series of major central banks preparing to announce monetary policy decisions this week.
Spot gold prices rose 0.2% to $5,005.04/ounce in this morning's trading session.
According to Mr. Ilya Spivak, Head of Global Macroeconomics at Tastylive, gold prices adjusted down in the first 24 hours of the week. This development reflects the positive response of the market after statements from the Iranian Foreign Minister. Accordingly, crude oil prices fell again, bond yields cooled down and the USD also lost some recent gains, while the stock market went up.
Iranian Foreign Minister Abbas Araqchi said on Monday that the Strait of Hormuz is not completely closed, and some ships can still move through this strategic shipping route.
However, oil prices still remain above the 100 USD/barrel mark as the war between the US, Israel and Iran has largely disrupted transportation through the Strait of Hormuz. Many oil tankers have been stranded for weeks, creating one of the largest energy supply shocks ever recorded in the global market.
US President Donald Trump continued to call on countries to support reopening this important oil transport route, and expressed dissatisfaction that no country is willing to participate in support.
High oil prices can boost inflation by increasing transportation and production costs. Although gold is often seen as an inflation hedging asset, maintaining high interest rates increases the attractiveness of profitable assets, thereby reducing demand for precious metals.
Mr. Spivak believes that developments from the US-Iran conflict and its impact on oil prices are still important factors for the gold market. However, the upcoming meeting of the US Federal Reserve (Fed) may also become a major fluctuating factor. Gold prices may weaken if the Fed signals monetary policy tightening.
Investors currently forecast that the Fed will keep interest rates unchanged in the decision announcement meeting on Wednesday, marking the second consecutive time it has not adjusted policy.
In addition to the Fed, many other major central banks will also meet this week, including the UK, the euro zone, Japan, Australia, Canada, Switzerland and Sweden. These are the first policy meetings since the Iran conflict broke out.
In other precious metals markets, spot silver prices increased 0.3% to 80.97 USD/ounce. Platinum rose 0.9% to $2,133.93 an ounce, while palladium fell 0.2% to $1,595.75 an ounce.
