Gold prices surged sharply in the first session of the week after the US and Iran announced a preliminary agreement to cool down tensions and restore transportation through the Strait of Hormuz. This development caused oil prices to fall sharply, thereby easing concerns about inflation and interest rate prospects.
Spot gold prices at one point increased by 2.7%, exceeding the $4,330/ounce mark. Previously, the precious metal had fallen by about 2.5% in the previous week.
The price increase momentum came from the weakening of the USD and the oil price plunging more than 4% after information that the parties reached a preliminary agreement framework. The market expects more favorable global energy circulation to help reduce inflationary pressure in the near future.
Mr. Christopher Wong – Foreign Exchange Strategist at OCBC said that the current macroeconomic context has become more favorable for gold.
This helps the macroeconomic environment become less disadvantageous for gold. However, the agreement still needs to be formalized, so the market may continue to experience short-term fluctuations during the transition period," he said.
According to this expert, for gold to regain stronger upward momentum, the market needs to witness a decrease in bond yields, oil prices maintained at a lower level, and expectations of a tough monetary policy by the US Federal Reserve (Fed) gradually cool down.
In recent months, gold and oil prices have fluctuated in opposite directions. High energy prices have increased concerns about inflation, causing the market to forecast that central banks will maintain high interest rates for longer. This is a disadvantage for gold because the precious metal does not bring yields.
Despite a strong recovery in the first session of the week, gold prices are still about 18% lower than at the end of February.
Investors are currently focusing their attention on a series of monetary policy meetings of central banks this week, especially the meeting of the US Federal Reserve (Fed). The market is still maintaining expectations that the Fed may raise interest rates by the end of this year if inflationary pressure has not cooled down as desired.
Spot gold price increased by 0.8% to 4,310.43 USD/ounce. In the precious metals market, silver prices increased by 4%, while platinum and palladium also increased. The Bloomberg Dollar Spot Index fell 0.2%.
Gold's recovery also supported the gold mining stock group in the Asia-Pacific region. Shares of Northern Star Resources increased by more than 8% in Australia, Zijin Mining at one point increased by nearly 9% in Hong Kong (China), while OceanaGold Philippines also recorded an increase of over 8%.
