Gold prices inched higher on Monday as a pause in the US-Iran war placated inflation concerns ahead of this week’s Federal Reserve interest rate decision.
Spot gold rose more than 1% to above US$4,100 ($5,860) an ounce, before paring some gains.
The move coincides with a decline in oil prices to a one-week low, as the US and Iran appear to have paused attacks on each other for a third straight night.
For months, bullion has come under pressure as the Middle East conflict stoked inflationary fears. This raised the likelihood that the Fed will begin to raise interest rates, a potential headwind for non-yielding assets like gold.
“Primarily what we’re seeing is the oil market is down from over US$100 last week to US$90, and it’s driving the interest rate outlook lower,” Bart Melek, global head of commodity strategy at TD Securities, told Reuters.
Since the war started, the yellow metal has lost nearly a quarter of its value, erasing all its gains accumulated since November.
Throughout the past month, gold has largely hovered around the US$4,000 level, which analysts considered as a key support.
While the current pause in fighting is positive for gold, the markets need a “meaningful resolution between the US and Iran” before it breaks out of this level, Justin Lin, an analyst at Global X ETFs, cautioned in a note to Bloomberg.
Investors are also monitoring the Fed’s interest rate decision on Wednesday. CME FedWatch data shows that 66% of traders are expecting no change in rates.
Write to Jackson Chen at Mining.com.au
Image: PICRYL
