Gold prices reportedly stabilized and maintained their gains after the market received news that the United States (US) and Iran have reached a tentative agreement to temporarily extend the ceasefire for 60 days.
The agreement also aims to start negotiations to end the war in the Middle East and discuss Tehran's nuclear program. This good news has indirectly reduced investors' fears about global inflation issues.
Spot gold prices rose 0.3% to $4,507.47 an ounce. Silver also rose 0.4% to $75.96, while platinum, palladium, and the US dollar index were reported to be little changed.
Before the agreement was announced, gold prices actually fell to their lowest level in two months on Thursday due to air strikes that almost derailed peace talks.
However, as soon as the news of the ceasefire came out, gold prices continued to rebound. However, this official decision is still awaiting final approval from US President Donald Trump.
The previous closure of the Strait of Hormuz has given the world economy an 'inflationary shock' as oil prices and logistics costs rose sharply. This has made many worry if ) will have to maintain high bank interest rates for a longer period to control inflation.
The latest data shows that the Fed report shows that consumer spending in the US increased in April, causing the annual inflation rate to increase at the fastest rate since 2023.
However, at the same time, the US economy was found to grow quite slowly in the first quarter of this year at a rate of 1.6%. Due to this misleading economic signal, the price of gold has actually fallen by about 15% since the end of February.
According to Christopher Wong, a strategist at Oversea-Chinese Banking Corp (OCBC), the rise in gold prices is currently seen as a form of 'temporary relief' for the macroeconomic market. Gold will only find solid support to rise higher if concerns about bank interest rate hikes begin to subside.
However, for now, gold price movements may remain uncertain until the market gets a clearer picture of the reopening of the Strait of Hormuz and the full terms of the formal agreement between the US and Iran.
