Gold prices edged higher today on hopes that Iran ceasefire talks could be back on, but it still faces its first weekly loss in five weeks as market uncertainty remains.
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Gold Has a Bad Week
Spot gold was up 0.65% at $4,726.62 in mid-trading, however, it is still down around 2% this week. U.S. gold futures for June delivery rose 0.4% to $4,741.30.
The uptick today came after it was revealed that Iran’s Foreign Minister Abbas Araqchi was expected in the Pakistani capital Islamabad to discuss proposals for restarting peace talks with the United States. However, he wasn’t expected to meet directly with U.S. negotiators.
The Iran war has weighed heavily on the gold price because of the subsequent hike in oil prices as the attacks on energy facilities and the closure of the crucial Strait of Hormuz crushed supply.
Iran War Impact Continues
Higher oil prices mean higher inflation, which in turn is likely to mean an uptick in interest rates. Gold tends to perform better in times of lower interest rates.
A peace treaty in Iran would help ease inflationary pressure and restore investors’ faith in the precious metal. That has been very evident over the last few months as geopolitical uncertainty, falling interest rates and central bank buying have made gold demand shine.
“It’s really just a headline-driven market because of all the uncertainty – the headlines right now seem to favour some kind of peace agreement with Iran, the market is looking at a net positive situation currently. Energies are coming off a little bit too,” said Daniel Pavilonis, senior market strategist at RJO Futures.
“Gold saw a fall this week because the oil price was going higher, so were expectations of higher rates, the dollar, yields, all correlated,” said UBS analyst Giovanni Staunovo.
When it comes to oil, gold and peace, uncertainty still remains.
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