During the Asian and European trading session on Wednesday, spot gold experienced a slight rebound after probing lower, maintaining its overall downtrend. The metal is currently trading around $4085, down 0.59%, having earlier dipped to $4050.
Gold prices have been under persistent pressure recently, influenced by a tightening of risk appetite in global equity markets. The easing of tensions between the US and Iran has failed to provide sufficient support for the metal, although underlying geopolitical positives suggest gold may be undervalued in the short term.
The geopolitical landscape in the Middle East has seen a phase of de-escalation. Adjustments to the navigation status of the Strait of Hormuz, coupled with diplomatic statements from various parties, have led to a significant cooling of conflict intensity in the region, which is broadly positive for gold.
In an effort to stabilize Gulf allies and address regional concerns, US Secretary of State Marco Rubio embarked on a diplomatic tour of the United Arab Emirates, Kuwait, and Bahrain. A primary goal of this visit is to alleviate Gulf nations' anxieties regarding the US-Iran interim memorandum of understanding. Following earlier intensive two-day diplomatic talks in Switzerland led by US Vice President Vance, a phased ceasefire agreement was finalized. Its core provisions include a cessation of hostile military actions across the Middle East, the resumption of navigation through the Strait of Hormuz, a phased relaxation of US sanctions on Iran, and a 60-day deadline for concluding specialized negotiations on Iran's nuclear program.
It is noteworthy that the UAE, Kuwait, and Bahrain, having previously faced cross-border retaliatory strikes from Iranian drones and missiles following joint US-Israeli airstrikes on Iran, hold a firmer stance on containing Iran compared to the previous administration. These Gulf states generally view the US-Iran agreement as favoring Iran and undermining their national security interests.
Addressing the core concerns of Gulf nations, Rubio provided public clarification. Firstly, Iran's planned $300 billion national investment fund will not receive approval to proceed, as the US has set a firm condition: Iran must abandon its revolutionary expansionist policy of exporting extremism and transform into a compliant, market-oriented sovereign state before any financial support is permitted.
Secondly, Gulf states' major concerns regarding Iran's ballistic missile development, support for proxy militias abroad, and deferred management of the nuclear issue have been incorporated into the scope of the bilateral memorandum of understanding signed last week. The memorandum requires Iran to cut off funding and military supplies to proxy groups like Hamas, Hezbollah, and the Houthis, and to cease regional armed conflicts entirely. These topics will be subject to specialized discussions in subsequent tiered negotiations.
However, it is important to note that these specific conditions were not written into the memorandum itself; they represent longstanding US positions. These points are likely to be discussed during the 60-day ceasefire period and constitute significant points of divergence in the ongoing US-Iran talks.
The dispute over navigation fees in the Strait of Hormuz was a central point of contention in the recent US-Iran diplomatic engagement. The US maintains its adherence to international law, asserting that the waterway is an international public channel where coastal states have no right to levy transit fees. Rubio explicitly stated the US's zero-tolerance policy towards Iran's proposed toll scheme, a position shared by Gulf states who believe the strait should remain free for navigation.
Recently, Iran's stance has shifted officially. Ali Bahreini, Iran's Permanent Representative to the United Nations Office in Geneva, stated on the 23rd that the Strait of Hormuz is fully open to merchant vessels and will be toll-free for the next 60 days. Both sides have established a dedicated communication mechanism to address navigation issues in real-time. After the 60-day period, detailed navigation rules will be determined based on a new round of US-Iran negotiations.
Prior to this, Oman, in coordination with the International Maritime Organization, had already opened a temporary shipping lane in the strait to ensure orderly passage for compliant vessels, aligning with the diplomatic pace of US-Iran de-escalation.
The recovery in shipping has directly ignited a surge in tanker charter rates. Bolstered by renewed demand for crude oil exports, regional tanker freight rates have skyrocketed, with operators' profits hitting cyclical highs this week. Data shows the charter cost for backup tankers outside the Strait of Hormuz has surged from $106,500 per week a week ago to $190,500 per day, nearly doubling, with charter rates rising sharply across the Gulf.
The ongoing dissipation of geopolitical risk premium is also directly weighing on international crude oil prices. Energy strategists at Rabobank note that with navigation flows through the strait steadily recovering and strategic petroleum reserves from various countries continuing to be released into the market, the short-term pressure on oil prices is difficult to reverse.
Summary and Technical Analysis
Currently, gold prices are primarily suppressed by a strong US dollar index and contracting risk appetite in equity markets, though they receive some support from geopolitical easing. The trend remains weak. However, the sustained decline in gold's price makes it more attractive for central banks to purchase in batches.
While the geopolitical shift is inherently positive for gold, recent severe volatility in equity markets has overshadowed this, suppressing the price. This relative cheapness of gold suggests that once the short-term disturbances in equities subside, gold may break its downtrend. This opportunity could emerge imminently, as opportunities are born from declines and risks from rallies. Subsequent focus should remain on gold's potential turning point.
From a technical perspective, gold continues to trade within a descending channel. It has currently found support at the channel's lower boundary and a key 0.618 Fibonacci retracement level. The focus going forward is on potential breakout opportunities above the channel's midline and the prevailing downtrend line.
As of the latest update, spot gold is quoted at $4076 per ounce.
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