Gold price is stuck in a tug of war – talks with Iran are rising, the Fed is dragging them down

TLDR

• Gold fell 0.7% in early trading in New York to $4,218.20, but earlier rose 1.1% in spot markets as US-Iran talks in Switzerland showed progress.
• Iran’s foreign minister said “significant progress” had been made, with mediators Qatar and Pakistan confirming a roadmap towards a broader agreement.
• Lower oil prices eased inflation fears and briefly supported gold, but a hawkish Fed signals limited gains
• Federal Reserve Chairman Kevin Warsh reiterated the view that US interest rates will remain high for longer, putting pressure on non-yielding assets such as gold.
• Investors are now awaiting the US personal consumption expenditures report later this week for clues on the interest rate path.

---

Gold prices swung in both directions on Monday as two competing forces dragged the market. Progress in nuclear talks between the United States and Iran in Switzerland led to an early rise in prices, but hawkish signals from the Federal Reserve (US central bank) limited gains.

The spot price of gold rose 1.1 percent to $4,205.05 per ounce in early Asian trading. By New York hours, futures had reversed course, falling 0.7% to $4,218.20 an ounce.

The metal is coming off three consecutive sessions of losses, declining 1.4% last week.

Talks between the United States and Iran ease concerns about energy

Talks between the United States and Iran continued in Switzerland on Monday. Iranian Foreign Minister Abbas Araqchi said that “significant progress” had been made during the quadripartite discussions.

Mediators from Qatar and Pakistan said that negotiators agreed on a road map towards a broader agreement. Technical discussions are scheduled to continue throughout the week.

Diplomacy also included efforts to ensure safe passage through the Strait of Hormuz, a major shipping route for global oil supplies.

Progress in those talks led to a decline in crude oil prices. Brent crude gave up previous gains as diplomatic developments emerged.

minimum Oil prices Concerns about energy-induced inflation were eased. This has lowered expectations that the Fed will need to tighten policy aggressively to fight price pressures, providing some support for gold.

Fed signals keep interest rate expectations high

Despite the geopolitical relief, gold’s gains were capped by the Fed’s tone.

Federal Reserve Chairman Kevin Warsh made hawkish comments that reinforced the view that US interest rates will remain high for longer. Markets are still digesting last week’s Federal Reserve meeting, as policymakers kept the door open for further interest rate increases.

Higher rates reduce the attractiveness of gold, which does not generate any returns. When investors can earn returns from bonds or savings, it is worth holding them gold weakens.

“While geopolitical risks should continue to provide fundamental support, the higher long-term US interest rate environment may limit near-term upside,” analysts at ING said.

Analysts at Saxo described Gold Bank as being stuck in a “technical impasse” at the present time.

The US dollar index rose 0.1 percent to 100.93, sitting near the 13-month high it reached last week. A stronger dollar makes goods priced in dollars more expensive for buyers abroad.

Investors are now awaiting the US Personal Consumption Expenditures Price Index report scheduled for release later this week. These data are the Fed’s preferred measure of inflation and can shape expectations about interest rate policy.

Other metals rose on the day. Silver rose 2.8 percent to $66.70 an ounce. Platinum rose 1.6 percent to $1,694.60 an ounce. Copper futures on the London Metal Exchange rose 0.8% to $13,700.33 per ton.