Spot gold prices surged dramatically early in the Asian trading session on Thursday, with the precious metal currently trading near $4,324 per ounce, marking an intraday jump of $66.
According to analysis, despite the Federal Reserve signaling potential interest rate hikes this year, optimism stemming from a US-Iran peace deal has propelled the price of gold higher. A provisional peace agreement between the United States and Iran was signed earlier.
Bolstered by this development, the price of gold climbed as much as 1.7% to $4,328 per ounce, erasing losses from the previous trading session. US and Iranian officials signed the peace agreement electronically on Wednesday evening, though it remains unclear if the Strait of Hormuz has been reopened.
The agreement is expected to alleviate the global energy shock driven by inflation and rate hike expectations. However, markets remain uncertain about how quickly fuel prices might fall and when shipping traffic through the strait could return to pre-conflict levels.
The Federal Reserve held interest rates steady on Wednesday, reaffirmed its commitment to price stability, and removed language from its statement regarding further adjustments to rate hikes. Traders have now fully priced in expectations for monetary policy tightening no later than October.
Higher interest rates are typically negative for precious metals like gold, which do not offer yield.
On Wednesday, spot gold prices plunged. During the first meeting under new Fed Chair Wash, the central bank, while keeping rates unchanged, hinted at rate increases later this year, boosting the US dollar and pressuring non-yielding gold.
Spot gold closed down $73.39, or 1.7%, at $4,257.62 per ounce on Wednesday.
Ryan McKay, a senior commodity strategist at TD Securities, noted that for gold, rate hike expectations were "largely priced in" ahead of the latest Fed decision. He stated, "The overall bias remains negative for gold... This suggests that a significant shift in the Fed's outlook may be needed to change the underlying sentiment in the precious metals market."
A survey by the World Gold Council revealed that a record 45% of reserve managers expect their institutions to increase gold holdings over the next 12 months.
Beyond gold, silver also rose 1.2% to $68.75 per ounce in early Asian trading on Thursday, following a 3% plunge the previous day. Platinum and palladium prices also advanced.
The Bloomberg Dollar Spot Index declined 0.1%, after gaining 0.7% in the prior session.
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