Gold Wavers as US-Iran Peace Deal Clashes with Tough Fed Stance
By Aboki Forex —
Gold prices moved in a tight range on Thursday. An interim peace deal between the United States and Iran gave prices a lift, but hawkish comments from the new Federal Reserve Chairman Kevin Warsh quickly checked those gains.
Bullion earlier rose as much as 1.7 percent before giving back some of that advance. Traders are weighing the impact of the US-Iran agreement against signals from Warsh that he will take a tough line on inflation.
Oil futures fell on the news. The pact is expected to ease a global energy shock that had been fueling bets for more interest rate hikes. But uncertainty remains. No one knows how quickly fuel prices can come down or when shipping through the Strait can return to normal.
“Lower oil still helps at the margin,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. “But the Fed outcome complicates the story and argues for a cautious near-term read on gold even as the medium-term constructive case has not disappeared.”
Wednesday’s Fed decision was the fourth straight meeting where policymakers left rates unchanged. Officials made it clear that inflation has become a bigger worry than weakness in the labor market. Traders now fully expect a rate hike by October.
Higher interest rates are a headwind for precious metals like gold, which do not pay interest.