Gold Advances While Oil Prices Continue to Retreat
Gold prices moved modestly higher on Tuesday as investors evaluated the implications of the recently announced U.S.-Iran peace framework and monitored a busy week of central bank meetings.
By 10:21 GMT, spot gold had gained 0.9% to $4,345.72 per ounce, while gold futures rose 0.3% to $4,366.25 per ounce.
The precious metal extended gains after a sharp rally on Monday, when bullion climbed more than 2% following the announcement of a preliminary agreement between Washington and Tehran aimed at ending hostilities and reopening the Strait of Hormuz.
Lower Energy Prices Ease Inflation Concerns
Expectations that oil shipments could gradually resume through the strategically important Strait of Hormuz have weighed on crude prices in recent sessions.
The decline in oil has helped reduce concerns that higher energy costs could reignite inflation and force central banks to tighten monetary policy further.
Gold, which does not generate interest income, often faces pressure when interest rates rise, making the inflation outlook a key factor for bullion investors.
Softer Dollar Provides Additional Support
The recovery in risk appetite has also weakened demand for the U.S. dollar.
Throughout the Middle East conflict, the greenback benefited from safe-haven flows and perceptions that the U.S., as a major energy exporter, would be relatively insulated from a surge in oil prices.
A dollar index measuring the U.S. currency against a basket of major peers traded slightly lower on Tuesday.
However, analysts at ING argued that underlying support for the dollar remains intact despite the recent drop in oil prices.
“The first 36 hours of trading after the US-Iran deal point to a structurally stronger dollar than a few weeks ago. Nearly all weekend losses have already been reversed despite a sharp drop in oil, signaling that FX markets are shifting focus away from crude and back to central banks,” analysts at ING said in a note.
Federal Reserve Meeting Takes Centre Stage
Market attention is increasingly turning toward the Federal Reserve’s policy announcement scheduled for Wednesday.
While policymakers are widely expected to leave interest rates unchanged, investors will closely watch comments from new Federal Reserve Chair Kevin Warsh during his first post-meeting press conference.
ING analysts said the Fed decision is “firmly in focus” as markets seek additional clues about the future direction of U.S. monetary policy.
Global Central Banks Remain in Focus
Investors are also monitoring decisions from several major central banks around the world.
The Bank of Japan raised its benchmark short-term interest rate by 25 basis points to 1.0%, marking its highest level in 31 years as policymakers continue efforts to contain inflation and normalize monetary policy.
Meanwhile, the Reserve Bank of Australia left its key interest rate unchanged at 4.35%, following three consecutive rate increases.