Gold prices maintained their upward momentum after information emerged that the US and Iran had reached a preliminary agreement to extend the ceasefire and continue negotiations towards ending the conflict in the Middle East, thereby helping to ease some of the concerns about inflation.
The precious metal traded around the threshold of 4,500 USD/ounce after increasing by 1% in the previous session. Notably, gold prices once fell to a two-month low in Thursday's trading session as new airstrikes raised concerns that the peace negotiation process could be disrupted.
According to a source familiar with the issue, the US and Iran have reached a preliminary agreement to extend the ceasefire for another 60 days, and at the same time launch new negotiations related to Tehran's nuclear program. However, this agreement still needs to be finalized by US President Donald Trump.
Mr. Christopher Wong – Strategist at Oversea-Chinese Banking Corp said that the recovery momentum of gold in the recent session reflects the return of positive sentiment on global financial markets.
Gold prices may receive better support when worried about the possibility of the US Federal Reserve (Fed) raising interest rates slightly. However, the upward trend may still be uneven until the market has more clear information about the resumption of transportation through the Strait of Hormuz as well as the specific terms of the US-Iran agreement," he said.
The fact that the Strait of Hormuz has been almost blockaded in recent times has created an inflation shock to the global economy, pushing energy prices up sharply. This increases concerns that central banks will have to maintain high interest rates for longer to control inflation.
This is a disadvantageous factor for gold because the precious metal does not bring yields.
Newly released economic data shows that US consumer spending in April increased slightly, while annual inflation rose to its highest level since 2023. In addition, the US GDP growth rate in the first quarter was adjusted down to 1.6%, lower than previously estimated.
Since the conflict broke out in the Middle East, gold prices have mainly fluctuated in a narrow range as investors continuously consider between positive and negative signals related to the prospect of a ceasefire. Currently, gold prices are still about 15% lower than at the end of February.
