Gold prices extended their upward momentum as signals appeared that the conflict in the Middle East may be coming to an end, as investors shifted their focus from concerns about interest rate hikes to long-term economic downturn risks.
The precious metal at one point increased by 1.2%, surpassing the $4,700/ounce mark, following a 3.5% increase in the previous session, before narrowing the increase momentum. US President Donald Trump said he expects the US to end the war with Iran within two to three weeks, showing that Washington has basically completed its military goals and will let other parties handle the clearing of the Hormuz Strait.
The stock market rose, while the USD weakened. Bond traders are down placing bets on the possibility that central banks will continue to raise interest rates to curb inflation caused by conflict, instead switching to assessing the impact of war on economic growth.
Ms. Yuxuan Tang - Head of Asian Regional Interest Rate and Foreign Exchange Strategy at JPMorgan Private Bank - said that the shelter's attractiveness of gold often returns when the market story shifts from inflation to growth risk. She believes that the Fed has very limited room to continue raising interest rates in this cycle and will focus more on the tensions in the labor market. Lower interest rates are a supporting factor for gold, an unprofitable asset.
Despite recovering in recent sessions, gold prices still fell nearly 12% in March, recording the strongest monthly drop since the 2008 global financial crisis. The Middle East conflict, which has now entered its fifth week, has disrupted the global market and disrupted energy supplies and many other commodities, raising concerns about a sharp increase in inflation, overwhelming gold's traditional shelter role.
However, Goldman Sachs Group Inc. is still among the organizations that hold a positive view on gold. In a report released on Tuesday, analysts Lina Thomas and Daan Struyven continued to maintain their forecast that gold prices will reach 5,400 USD/ounce by the end of the year, citing the fact that central bank buying demand remains and expectations that the US will have two more interest rate cuts this year.
White House Press Secretary Karoline Leavitt said that Mr. Trump will give a nationwide speech on Wednesday evening to provide "important updates on Iran". The US leader has recently continuously given mixed signals, both saying that an agreement is very close and warning of the possibility of escalating military activities.
On the Iranian side, this country also put forward a number of conditions to end the conflict, including the requirement to control the Strait of Hormuz, an important transportation route that once accounted for about 1/5 of global oil and liquefied natural gas before the war broke out. State media quoted President Masoud Pezeshkian as saying that Iran is ready to end the war if the requirements are met.
As of this afternoon's trading session, spot gold prices increased by 1.53% to 4,719.68 USD/ounce. Silver prices fell 1.3% to 74.21 USD/ounce, while platinum edged up slightly and palladium went sideways. The Bloomberg Dollar Spot index, a measure of the strength of the USD, fell 0.1% after losing 0.6% in the previous session.
