Gold widens gains to three-week high on Iran war truce

Gold prices rose in the European market on Wednesday to extend their gains for the second consecutive day, recording a three-week high based on the broad decline of the US dollar against a basket of global currencies, following the agreement between the United States and Iran on a two-week ceasefire, which includes the opening of the Strait of Hormuz to global navigation.

With the sharp drop in global oil prices, indicators of receding inflationary pressures on monetary policymakers at the Federal Reserve are increasing, which strengthens the probabilities of cutting American interest rates this year.

Price Overview

– Gold prices today: gold prices rose by 3.25% to ($4,857.56), the highest since March 19, from the opening level of trading at ($4,706.34), and recorded a low of ($4,706.34).

– At the settlement of prices on Tuesday, gold prices achieved an increase of 1.25%, marking the first gain in three days, supported by the decline of the US dollar.

US Dollar

The dollar index fell on Wednesday by 0.85%, deepening its losses for the third consecutive session and recording a four-week low at 98.69 points, reflecting a broad decline in the levels of the American currency against a basket of global currencies.

As is known, the decline in the levels of the American currency makes gold bullion priced in US dollars more attractive to buyers who hold other currencies.

Risk sentiment in the markets improved, and investor appetite for buying global assets and currencies increased following the ceasefire agreement between the United States and Iran.

Iran War Updates

– Washington and Tehran agree on a two-week ceasefire and plan to open the Strait of Hormuz.

– US President Donald Trump agreed to suspend attacks and aerial bombardment against Iran for 14 days, following intensive Pakistani and Qatari mediation.

– Iran announced its agreement to reopen the Strait of Hormuz to international navigation “fully and safely,” with technical coordination with the Iranian armed forces to secure the passage of ships.

– Direct negotiations to end the war are scheduled to begin next Friday in the city of Islamabad in Pakistan, as the truce aims to provide an opportunity for a diplomatic solution.

Global Oil Prices

Global oil prices fell by an average of 13%, recording their lowest levels in several weeks, as concerns over global supply shortages receded, especially after the reopening of the Strait of Hormuz to giant oil tankers.

US Interest Rates

– According to the CME FedWatch tool from CME Group: the pricing of the probabilities of keeping American interest rates without any change in the upcoming April meeting is currently stable at 99%, and the pricing of the probabilities of raising interest rates by about 25 basis points is stable at 1%.

– After the pause in the war, traders began to price the existence of probabilities for an interest rate cut by the Federal Reserve this year.

– In order to re-price those probabilities, investors await later today the release of the minutes of the last monetary policy meeting of the Federal Reserve.

Expectations about Gold Performance

Nicholas Frappell, global head of markets at ABC Refinery, said: People entered this session believing that escalation was highly likely, but the announcement of a two-week truce turned this expectation upside down, and that was positive for gold.

Independent metals trader Tai Wong said: This is a temporary recovery, and it remains to be seen whether Iran will adhere to it. For gold, the 200-day moving average at $4,930, and then $5,000, will represent major obstacles.

SPDR Fund

Gold holdings at the SPDR Gold Trust fund, the largest global exchange-traded fund backed by the metal, remained without significant change on Tuesday, leaving the total at 1,054.42 metric tons, which is the highest level since last February 20.