Gold little changed as traders weigh Iran talks, Fed rate risks

Gold prices were little changed on Thursday as investors weighed the prospect of a US-Iran agreement against persistent inflation concerns and a higher-for-longer interest rate backdrop.

Spot gold traded at $4,534.69 an ounce in late morning action, down 0.2% from the previous session.

The move followed a gain of more than 1% on Wednesday, when bullion posted its strongest daily advance in two weeks.

US gold futures for June delivery were recently at $4,536.70 an ounce on the Comex division of the New York Mercantile Exchange, down $8.10, or 0.2%, for the session.

The muted trading reflected a market caught between two opposing forces.

Optimism around a possible agreement between Washington and Tehran helped ease some concerns over oil-driven inflation, while rising Treasury yields continued to weigh on non-yielding assets such as gold.

Iran talks temper inflation fears

Investor sentiment improved after President Donald Trump said talks with Iran were in the final stages, raising hopes that a deal could reduce tensions in the region.

A de-escalation could ease pressure on oil prices, which have been a key driver of inflation expectations since the Iran conflict began in late February.

Higher oil prices tend to feed into broader price pressures, strengthening the case for tighter monetary policy and reducing gold’s appeal.

Kelvin Wong, senior market analyst at OANDA, said the latest comments around the negotiations had helped sentiment toward gold.

“After Trump’s remarks that both sides are at the final stages of the peace agreement, sentiment turned positive on gold,” Wong said.

Still, the market remained cautious.

Since the start of the conflict, gold has fallen more than 14% as higher energy prices fuelled inflation risks and reinforced expectations that interest rates could stay elevated for longer.

Treasury yields keep pressure on bullion

The yield on the 10-year Treasury note rose to 2.418% in late morning trading, up from 2.364% in late New York trading on Wednesday.

Higher long-term yields increase the opportunity cost of holding gold, which does not pay interest.

That dynamic has limited bullion’s ability to extend gains, even as geopolitical risks continue to support safe-haven demand.

Wong said the medium-term rise in US Treasury yields since early March was likely to cap any sharp upside in gold in the short term.

Markets are also assigning a growing probability to further Federal Reserve tightening.

According to CME Group’s FedWatch tool, traders are pricing in a 39% chance of a 25-basis-point rate increase in December.

Minutes from the Fed’s April meeting showed that a majority of policymakers saw some further policy firming as likely to be warranted if inflation remained above the central bank’s 2% target or if conditions evolved in a way that required additional action.

Silver, platinum and palladium decline

Other precious metals also traded lower.

July silver futures were at $75.40 an ounce on Comex, down 0.8% from the previous session.

July platinum futures fell 0.7% to $1,936.10 an ounce, while August palladium futures slipped 0.4% to $1,365.12 an ounce.

Gold outlook remains fragile

In the near term, gold is expected to remain under pressure as investors track the direction of yields, the Fed’s policy signals and updates on the US-Iran talks.

OANDA sees resistance for gold near $4,645, with support around $4,456.

Wong said bullion was struggling to find a firmer footing because it was caught between optimism over a potential Iran deal and the drag from a restrictive rate environment.

As a non-yielding asset, gold typically performs better when interest rates are falling.

With markets still preparing for the possibility of further Fed tightening, any sustained rally may require clearer evidence that inflation risks are easing and Treasury yields are stabilising.