Gold posts modest gains near $4,800 as traders brace for US-Iran talks progress
- Gold price trades with mild gains around $4,795 in Friday’s early Asian session.
- Trump announced that Israel and Lebanon had agreed to a 10-day ceasefire.
- Higher-for-longer interest rates could weigh on the precious metals.
Gold price (XAU/USD) posts modest gains near $4,795 during the early Asian session on Friday. Traders weigh signs of easing geopolitical tensions against persistent inflationary pressures. The next meeting between the United States (US) and Iran may take place over the weekend.
Reuters reported that a 10-day ceasefire between Lebanon and Israel went into effect on Thursday. Israeli Prime Minister Benjamin Netanyahu confirmed that he’d agreed to the truce in a bid to advance talks toward a “historic peace agreement” with Lebanon.
US President Donald Trump expressed optimism about the possibility that the US and Iran could clinch a permanent ceasefire as the two countries negotiate an extended truce ahead of its expiration next week. Traders will closely monitor the developments surrounding the US-Iran peace talks over the weekend for fresh impetus.
Meanwhile, a blockade of the Strait of Hormuz remains a critical concern. Any disruption to energy supplies could boost crude oil higher, fueling inflation and making central banks less likely to cut interest rates. Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.
Higher demand from major central banks might help limit the yellow metal’s losses. The People’s Bank of China (PBoC) has extended its gold purchasing streak to 18 consecutive months through March 2026. This trend marks a structural shift as institutions prioritize de-dollarization and diversification amid rising global instability.
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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