Gold prices have maintained their gloomy pace around $4,550 for several weeks as investors see hope for US-Iran peace talks.
At 9 am, gold prices were trading at $4,544, down 0.56% since they opened early Tuesday in Asian trading.
Negotiations between the United States and Iran are seen to be increasingly positive as US President Donald Trump said talks to extend the ceasefire and reopen the Strait of Hormuz are now going well.
Trump also urged several Middle Eastern countries including Saudi Arabia, Qatar, Pakistan, Turkey, Egypt and Jordan to join the Abraham Accords to expand diplomatic relations with Israel while talks with Iran are still ongoing.
Although the development gave positive sentiment to the market, the United States and Israel have yet to finalize several important issues. Among them are the issue of freedom of passage of merchant ships in the Strait of Hormuz and the timing of the release of billions of dollars of previously frozen Iranian funds.
Commodity markets, especially crude oil and gold, also reacted to the development. The expected reopening of the Strait of Hormuz is seen as able to reduce the risk of global oil supply disruptions, thus putting pressure on oil prices.
At the same time, gold received support as investors saw the potential for inflationary pressures to change following the geopolitical developments. KCM Trade market analyst Tim Waterer said hopes for a US-Iran deal had helped boost sentiment towards gold from an inflation perspective.
In addition to geopolitical developments, investors are now also paying attention to the US Personal Consumption Expenditure (PCE) Price Index report for April, which will be published late Thursday. The inflation data is an important indicator of the direction of the Federal Reserve System's monetary policy.
If the PCE data shows that inflation is still high, it could reinforce expectations that the Fed will maintain high interest rates for longer. This situation has the potential to put pressure on the prices of commodities traded in US dollars, including gold.
