World gold prices in the past 24 hours increased sharply, to the highest level in two weeks, as the market expects tensions between the US and Iran to cool down soon, pulling oil prices down.
At one point, this precious metal jumped to 4, 764.6 USD/ounce, the highest since April 23.
US gold futures for June delivery also increased by about 1.1%, to nearly 4,746 USD/ounce.
According to analysts, the deep decline in oil prices is a major driving force supporting the precious metals market. WTI oil prices fell more than 3 USD/barrel, to around 91.85 USD/barrel, while Brent oil fell below 98 USD/barrel, after information that the US and Iran may make progress in peace negotiations.
Mr. Fawad Razaqzada - market analyst at City Index - said that the decline in oil prices is pulling down bond yields, thereby supporting gold.
When oil prices fall, bond yields often weaken as the market reduces expectations that central banks will continue to raise interest rates. This creates favorable conditions for gold and silver to appreciate," he said.
Investor sentiment improved after US President Donald Trump expressed his expectation that the conflict with Iran could end soon. Some sources said Tehran is considering a peace proposal from Washington, which includes content related to reopening the Strait of Hormuz - the world's important oil transport route.
Expectations of cooling down tensions make global stocks brighter, while the USD continues to weaken. The USD Index fell to around 97.88 points, near its lowest level in more than two months. Weaker greenbacks make gold more attractive to investors holding other currencies.
In addition, the yield on 10-year US government bonds also fell back to around 4.3%, reducing the opportunity cost of holding gold - a non-performing asset.
US economic data released on the same day showed that the number of initial jobless claims increased to 200,000 claims in the week ending May 2, higher than the previous week but still lower than analysts' forecast of 205,000 claims.
This report shows that the US labor market is still relatively stable, but has not created enough pressure for the US Federal Reserve (FED) to accelerate its interest rate hike roadmap.
According to CME Group's FedWatch tool, the market currently only bets on about 12% of the FED's ability to raise interest rates by the end of this year, down from 16% in the previous session.
Investors are currently focusing on following the US non-farm payroll report released on May 8 to find more signals about the FED's monetary policy orientation in the near future.
Not only gold, many other precious metals also surged sharply. Spot silver prices rose more than 5%, to around 81.15 USD/ounce - the highest level in more than two weeks. Platinum and palladium prices also simultaneously went up.
In addition to short-term factors, gold buying from central banks continues to support the market. The People's Bank of China has just recorded its 18th consecutive month of gold buying, raising total reserves to 74.64 million ounces by the end of March.
