Gold rose after negotiators heralded progress in talks between the US and Iran to find a permanent resolution to the war that’s roiled global markets.
Bullion climbed as much as 1.6% to top $4 220 an ounce, wiping out a loss from last week, after Qatar and Pakistan said in a joint statement that “encouraging progress” was made in a first round of high-level peace negotiations in Switzerland. Talks will continue for the rest of the week, they said, soothing concerns after US President Donald Trump had earlier issued a fresh threat to strike Iran.
Among other things, a communication line between Tehran and Washington was formed with the aim of securing safe passage for commercial vessels through the Strait of Hormuz. Oil prices fell on Monday, and crude continued to flow via the strait over the weekend. The US and Iran signed a memorandum of understanding last week that began the process of deescalation and opened a 60-day window for further talks.
Gold has fallen for three consecutive weeks and is down by around a fifth since the war began at the end of February. The near-closure of Hormuz has choked oil and natural gas flows and pushed up energy prices, raising the likelihood that central banks will hike borrowing costs to combat inflation. This is a headwind for precious metals, which don’t pay interest.
New Federal Reserve Chairman Kevin Warsh adopted a hawkish tone on inflation during his first policy meeting last week, without giving any clear signal on the future path for interest rates. Looking ahead, traders will be monitoring the price index for US personal consumption expenditures due Thursday, which are expected to show acceleration.
Gold rose 0.8% to $4 189.23 an ounce at 10:00 a.m. in Singapore. Silver was 2% higher at $66.21 an ounce, following a decline of 4.6% last week. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was up 0.1%.