Gold was little changed as traders monitored diplomatic efforts to cool United States-Iran tensions , potentially pushing energy prices lower and easing pressure on the U.S. Federal Reserve to raise interest rates. Bullion traded near US$4,050 an ounce , after ending largely unchanged on Monday. After calling off an attack, President Donald Trump said his latest offer of talks was Tehran’s “last chance,” and that he expects a full reopening of the Strait of Hormuz. Tehran denied it was talking with the U.S., but said discussions with Oman to get more ships moving through Hormuz were making progress. Separately, U.S. and Japanese officials signalled they’re determined to keep defending the yen after their first joint intervention in 15 years. Japan is the largest foreign holder of U.S. Treasuries, and any sales to fund its efforts to support the currency would risk pressuring U.S. bonds at a time when inflation concerns and the Iran war are pushing up yields. Gold has declined by more than a fifth since the U.S.-Iran war began in late February, with high energy prices stoking inflationary pressures and raising the likelihood that interest rates will stay higher for longer — a headwind for precious metals . Still, Fed officials opted to keep policy unchanged when they met last week, although there were three dissents in favour of a hike. Fed Bank of New York President John Williams said that interest rates remained well positioned as inflation should ease during the second half, according to an interview with Reuters published on Monday. Still, if inflation did not behave as expected, then the central bank would need to act, Williams added. While waiting for fresh signals from the Middle East, banks have turned attention to the near-term outlook for the gold market . “Re-accelerating central-bank gold demand, led by China, should help gold prices rebound despite likely temporary downside price pressure from energy and rates markets,” Goldman Sachs Group Inc. analysts including Daan Struyven said in a note. Why investors can breathe easier after the Fed holds its fireAllied Gold’s $5.5 billion sale to Chinese miner falls apart amid slide in gold prices Citi Research said gold could stagnate or even decline over the next month before rallying to US$4,500 an ounce in the fourth quarter. “Our base case is for the U.S.-Iran conflict to end and Hormuz flows normalizing and, with this, lower real interest rates and a weaker dollar and stronger investor interest in gold returning,” analysts including Kenny Hu said. Spot gold fell 0.1 per cent to US$4,050.27 an ounce at 10:26 a.m. in London. Silver was up 0.9 per cent at US$58.70 an ounce. Platinum and palladium also rose. The Bloomberg Dollar Spot Index, a gauge of the U.S. currency , was little changed after ending the previous session marginally lower. —With assistance from William Clowes. Bloomberg.com
Gold holds steady with U.S.-Iran standoff and Fed outlook in focus
