On Thursday, June 4th, reports that U.S. President Donald Trump is reluctant to re-enter a full-scale war with Iran following recent clashes triggered a sharp decline in oil prices, a simultaneous retreat in the U.S. dollar and Treasury yields, and a significant rebound in the spot price of gold. Earlier news of a ceasefire agreement between Israel and Lebanon also weighed on oil prices.
Spot gold closed sharply higher on Thursday, gaining $40.71 or 0.92% to settle at $4,475.01 per ounce.
FXStreet analyst Christian Borjon Valencia noted that gold prices rose around 1% on Thursday as falling oil prices eased inflationary pressures and market speculation about a potential resolution to U.S.-Iran tensions boosted sentiment. The price rebounded after touching an intraday low of $4,424 per ounce.
Israel and Lebanon Ceasefire Agreement
Independent precious metals trader Tai Wong stated that reports of a ceasefire agreement between Israel and Lebanon put pressure on the U.S. dollar and Treasury yields, helping gold prices hold just above the critical 200-day moving average.
Israel and Lebanon announced on Wednesday evening that they had agreed to a ceasefire, raising hopes for a potential U.S.-Iran deal.
The U.S. Dollar Index fell 0.2%, making dollar-denominated gold relatively cheaper for holders of other currencies. Concurrently, U.S. Treasury yields, including the 10-year note, declined, further enhancing gold's appeal.
Wong commented, "Unless we see a clear and lasting ceasefire with Iran and the reopening of the Strait of Hormuz, leading to lower energy prices and removing concerns about potential rate hikes, the likelihood of gold hitting new highs this year seems to be diminishing."
Gold itself does not yield interest; when interest rates remain elevated, it diminishes the metal's attractiveness.
As a traditional safe-haven asset, gold hit a record high of $5,594.82 per ounce on January 29th, but has fallen approximately 16% since the Iran conflict escalated in late February.
Trump Remarks Trigger Oil Price Plunge
WTI crude oil prices plunged over 4% on Thursday, alleviating concerns that high energy prices could trigger a surge in inflation. The immediate trigger for the oil price drop was a report stating that U.S. President Donald Trump is reluctant to re-enter a full-scale war with Iran following recent clashes.
According to the report, Trump has indicated to aides that a weeks-long ceasefire with Iran remains in place despite recent sporadic clashes.
The report stated that Trump is not eager to resume a full-scale war with Iran but would consider ending the ceasefire if Iran kills American soldiers.
A White House official said Trump "has always preferred a diplomatic solution" but has also made it clear that Iran will face consequences if it refuses to reach a deal.
Tensions around the Strait of Hormuz have been a significant factor pushing oil prices higher in recent weeks. This strait is a crucial chokepoint for global energy trade, and any disruption to shipping would prompt the market to rapidly reassess global crude supply risks.
With Israel and Lebanon agreeing to implement a ceasefire, markets began betting on an increased likelihood of the Strait of Hormuz reopening, leading to a swift retreat in oil prices.
Dollar and Treasury Yields Slide; Focus on Jobs Report
The U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, fell 0.21% on Thursday to 99.34.
U.S. Treasury yields also trended lower; the benchmark 10-year yield fell 3 basis points to 4.463%.
Meanwhile, Federal Reserve officials delivered speeches. Kansas City Fed President Schmid stated, "inflation remains too high," adding it is the biggest risk to the U.S. economy currently, and noted the core question is "whether the Fed should be patient or take action on interest rate policy."
San Francisco Fed President Daly said artificial intelligence has neither raised nor lowered inflation levels, adding that current monetary policy is in a good place.
Investor attention turned to the upcoming U.S. May non-farm payrolls report due Friday. This data will reveal the health of the labor market, allowing investors to glean clues about the future path of Federal Reserve monetary policy.
Technical Analysis for Gold
FXStreet analyst Christian Borjon Valencia pointed out that from a technical perspective, gold is currently holding above the 200-day Simple Moving Average (SMA), located at $4,427 per ounce; a break below this support could open the door for further declines. The Relative Strength Index (RSI) shows the indicator is currently trending upward, signaling that bullish momentum is gradually strengthening.
Valencia stated that if the closing price can firmly settle above $4,500 per ounce, it could challenge the strong resistance of the 20-day SMA at $4,562. A break above this resistance would target the $4,600 level; subsequent hurdles would be the 50-day SMA at $4,628 and the 100-day SMA at $4,797.
Valencia added that conversely, if gold continues to face resistance below $4,500, its path of least resistance would point lower. The first support would be the 200-day SMA at $4,427, followed by the psychological $4,400 level. A break below that could target the area around the March 23rd swing low of $4,098 per ounce.
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