Gold edges higher to near $4,700 on US‑Iran peace hopes
- Gold price edges higher to around $4,700 in Thursday’s early Asian session.
- Hopes for a final deal between the US and Iran underpin the Gold price.
- The US employment report data for April will be in the spotlight later on Friday.
Gold price (XAU/USD) gains momentum to a one-week high near $4,700 during the early Asian session on Thursday. The precious metal extends the rally as optimism over a US-Iran peace deal eased concerns over inflation.
Bloomberg reported on Wednesday that the US and Iran were circling a fresh proposal to end the war, as US President Donald Trump searches for an exit from a conflict that has spiked energy prices and damaged his political standing. Trump added that the war has “a very good chance of ending” and there’s a possibility that it will happen before his trip to Beijing next week.
Easing concerns over price pressures could convince the US Federal Reserve (Fed) to cut the interest rate rather than keep policy restrictive for longer. This, in turn, could provide some support to yellow metals as they signal a decrease in the opportunity cost of holding the metal.
“The optimism about a final deal between the US and Iran has caused at least some short-term relief in gold,” said Peter Grant, vice president and senior metals strategist at Zaner Metals. However, he also cautioned that the market can still “pivot on Middle East headlines.”
Traders brace for the US employment report data for April later on Friday, as it might dictate the Fed's next move regarding interest rates. Any signs of improvement in the US labor market could lift the US Dollar (USD) and weigh on the USD-denominated commodity price in the near term.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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