Gold climbs above $4,550 on US‑Iran deal hopes
- Gold price jumps to around $4,570 in Monday’s early Asian session.
- The US and Iran have both signaled progress in talks to bring an end to the conflict.
- The US PCE inflation data will be in the spotlight later on Thursday.
Gold price (XAU/USD) rises to near $4,570 during the early Asian trading hours on Monday. The precious metal attracts some buyers on weaker US Dollar (USD) after the reports that the United States (US) and Iran are closing in on a deal that would reopen the Strait of Hormuz.
Bloomberg reported on Sunday that Washington and Tehran have signaled progress in talks to end the war, even as US President Donald Trump said he won’t “rush” into an agreement. Last week, US Secretary of State Marco Rubio stated that there were “good signs” that an agreement to end the conflict is in sight, but warned any such deal would be “unfeasible” if Iran pursues measures to permanently control shipping through the critical waterway.
Uncertainty over a deal between the US and Iran fuels growing fears that prolonged restrictions on shipping through the Strait of Hormuz will damage global economic growth.
Traders will closely watch the release of the US Personal Consumption Expenditures (PCE) - Price Index report, which is due later on Thursday. Any signs of hotter inflation in the US could reinforce a potential rate hike from the US Federal Reserve (Fed) and weigh on the USD-denominated commodity price.
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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