Gold prices fall as US-Iran peace talks remain uncertain
What's the story
Gold prices witnessed a decline on Thursday, after two consecutive days of gains. The drop was mainly due to investors waiting for clearer indicators of progress in the de-escalation efforts in the Middle East. Spot gold fell by 1% to $4,476.51 per ounce at 5:55am GMT while US gold futures for April delivery dropped by 2.1% to $4,457.
Market reactions
Trump claims Iran eager to reach deal
The uncertainty surrounding the US-Iran negotiations is impacting gold prices. President Donald Trump claimed Iran was eager to reach a deal and end nearly four weeks of fighting. However, the Iranian foreign minister denied these claims, saying his country was considering a US proposal but had no plans for talks to resolve the conflict.
Market forecast
Gold prices to react to negotiation headlines
Kyle Rodda, a senior financial market analyst at Capital.com, predicted that in the next 24 to 48 hours, gold prices will largely react to headlines about negotiations. He said major price movements are likely at the start of next week when it becomes clearer whether the US will launch a ground invasion in Iran over the weekend.
Military response
Trump threatens to escalate military action against Iran
Trump has promised to hit Iran harder if Tehran doesn't accept that it has been "defeated militarily." This was confirmed by White House press secretary Karoline Leavitt on Wednesday. The promise comes amid rising tensions in the region and concerns over potential further escalation of conflict.
Inflation effects
Impact of rising crude prices and interest rates on gold
Higher crude prices often lead to inflation by increasing transport and manufacturing costs. While rising inflation usually makes gold more attractive as a hedge, high interest rates can dampen demand for this non-yielding asset. Currently, CME Group's FedWatch Tool indicates that markets see almost no chances of a Federal Reserve rate cut this year.