Gold, silver prices jump 4% as US-Iran reach peace deal
What's the story
Gold and silver prices witnessed a spike today after the US and Iran reached a deal to end their ongoing conflict. The international spot gold was trading 2.65% higher at $4,351.20 per ounce while silver rose by 4.18% to $70.81 per ounce in early Comex trade today. In India, on the Multi Commodity Exchange (MCX), gold futures for the August contract opened 1.8% higher at ₹1,53,300 per 10gm.
Market dynamics
Gold has sharply declined this year
Despite heightened geopolitical tensions and the West Asia conflict, gold has sharply declined this year. The markets are more focused on interest rates, US dollar strength, and investor expectations for monetary policy than traditional safe-haven demand. "While gold often rises during periods of uncertainty, it struggles when real yields rise," Ross Maxwell from VT Markets said.
Market forecast
Fed response to inflation could impact gold's future
Maxwell predicts that gold's future will depend on inflation and the Federal Reserve's response. He said, "The sustained increase in energy prices due to the conflict in the Middle East is beginning to feed through into global inflation, increasing transportation, manufacturing and consumer costs." This could prompt the Fed to delay interest-rate cuts or consider further tightening measures.
Inflation effect
Stagflation fears could lead to gold rebound
Maxwell also noted that inflation could support gold if investors begin to question central banks' ability to contain price rises. He said, "Gold could rebound if inflation accelerates while economic growth weakens, creating fears of stagflation." The analyst also pointed out that increased central bank buying or a significant deterioration in geopolitical conditions could be bullish factors for gold prices.