(April 17): Gold headed for a fourth weekly gain after President Donald Trump expressed optimism that the US and Iran could agree a permanent ceasefire to end the war that’s upended markets and heightened inflation fears.
Bullion was steady near US$4,785 an ounce in Asian trading hours, on track for a small gain this week. Trump said on Thursday that Iran had agreed to terms related to nuclear weapons that it has long resisted, as well as reopening the Strait of Hormuz, although some European and Gulf Arab leaders predicted that a US-Iran peace deal could take about six months to be brokered.
Trump also announced that Israel and Lebanon had agreed to a 10-day ceasefire, a move that was later confirmed by Israeli Prime Minister Benjamin Netanyahu. But control over Hormuz, the key waterway that links the Persian Gulf to global markets, remains contentious, with a US naval blockade still in place and Iran pressing ahead with plans to charge ships for transit even after the war is over.
Oil dropped on Friday, while a record-breaking rally in global equities stalled in Asia as investors withheld big bets ahead of the weekend. A recent retreat in energy prices has relieved some of the inflationary pressure that has weighed on bullion since the war began seven weeks ago. Concern about rising consumer prices has led traders to bet that central banks will hold interest rates steady for longer or even hike them — a headwind for non-yielding bullion.
Federal Reserve Bank of New York President John Williams said on Thursday that high uncertainty should prevent policymakers from providing any strong guidance on the future path of rates, though his outlook still includes cuts in the longer term.
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“The underlying backdrop has shifted in a more constructive direction,” Ole Hansen, head of commodity strategy at Saxo Bank AS, wrote in a note. “Lower real yields, a softer dollar, renewed rate-cut expectations and very light speculative positioning collectively point towards a market that is rebuilding rather than breaking down,” he said.
Hedge funds have reduced their net long positions on gold to the lowest level in more than two years, according to the latest reporting week ending April 7. “Lean positioning reduces the risk of further long liquidation and instead creates scope for renewed buying should the technical outlook improve and macro conditions remain supportive,” said Hansen.
Though gold has clawed back losses in recent weeks, the metal has still lost about 9% since the start of the conflict in late February, with a liquidity squeeze in the early days of fighting leading investors to offload holdings and cover losses elsewhere. Disruption to energy supplies is also likely to last beyond the war, keeping inflation risks high, as strikes have damaged key oil and gas infrastructure in the Middle East.
See also: Gold falls as renewed Hormuz disruption stokes inflation concern
Spot gold edged 0.1% lower to US$4,784.33 an ounce at 9.23 am in London. Silver climbed 0.7% to US$78.96 an ounce. Platinum and palladium edged lower. The Bloomberg Dollar Spot Index was on track for a 0.5% loss this week.
Uploaded by Evelyn Chan
