Gold prices are trading lower again, hovering around $4,700 as the US-Iran war ceasefire situation temporarily lasts for two weeks.
At 9.10 am, gold prices were at $4,712, down 0.15% since it opened in early trading on Thursday in the Asian session.
US President Donald Trump announced that he agreed to suspend bombing and attacks on Iran for two weeks, provided that Tehran reopens the strategic Strait of Hormuz route.
This development provided initial relief to global markets as geopolitical risks were seen to have temporarily eased. The sentiment helped reduce inflationary pressures and potentially opened the way for a rate cut by the US central bank, thus supporting demand for gold.
However, this positive momentum is expected to be limited. Tensions in the Middle East are still ongoing with sporadic fighting reported, including in Lebanon. Iran also saw the incident as an early violation of the terms of the newly agreed ceasefire.
In recent weeks, gold has faced selling pressure on concerns that a spike in oil prices due to the conflict will increase inflation. This could limit central banks’ room to cut interest rates.
While gold remains a safe haven asset during times of geopolitical uncertainty, its appeal tends to diminish in a high-interest-rate environment.
Meanwhile, Federal Reserve meeting minutes showed policymakers still expect interest rate cuts this year.
However, they stressed the need to remain flexible in assessing the impact of the conflict and trade policies on inflation and the labor market, which is seen as still stable but not significantly improving.
