Gold surges after Fed remarks, Trump eyes Iran war end
Gold extended a two-day rally following remarks from the Federal Reserve that eased expectations of further rate hikes, alongside reports that US President Donald Trump is open to ending the conflict with Iran without reopening the Strait of Hormuz.
Bullion surged as much as 2.4% on Tuesday before trimming some gains, trading near $4,560 an ounce, News.Az reports, citing Bloomberg.
The jump followed a Wall Street Journal report indicating that Trump told aides he is willing to conclude the US military campaign against Iran even if the Strait of Hormuz remains mostly closed, fueling hopes for an end to the month-long conflict.
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Earlier, Fed Chair Jerome Powell stated that long-term US inflation expectations remain under control, despite a spike in oil prices driven by the war, which had raised concerns about inflation and interest rate hikes. He noted that the central bank’s policy was “in a good place for us to wait and see.”
Gold benefited from falling Treasury yields after Powell’s comments, as lower yields reduce the opportunity cost of holding bullion. However, the money market is predicting less than one rate cut by the end of the year, and yield curves remain steep.
“That means the market has yet to transition to pricing in an economic downturn,” said Liu Shiyao, an analyst at Zijin Tianfeng Futures Co., adding that “gold is likely to remain under pressure with limited scope for a swift recovery” in the near term.
Traders are also weighing mixed signals from the US, as the White House threatened to escalate strikes on Iran, including targeting key civilian infrastructure. Meanwhile, Tehran has approved legislation to impose fees on vessels transiting the Strait of Hormuz and is urging Yemen’s Houthi militant group to prepare for renewed attacks on shipping in the Red Sea.
Iran also targeted a Kuwaiti crude carrier near Dubai, Kuwait Petroleum Corp. reported on Tuesday.
The developments have raised concerns about the potential for a prolonged conflict that could see energy prices rise further and lead central banks to hike rates to tame inflation — a negative for non-yielding precious metals. That, along with a liquidity squeeze in broader financial markets, has set gold on track for a monthly decline of around 13%.
Spot gold rose 1% to $4,558 an ounce as of 12:15 p.m. Singapore time. Silver climbed 2.8% to $72.04 an ounce. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index fell 0.1% after ending the previous session up 0.3%.
By Nijat Babayev
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