Gold prices surged more than 3% on Wednesday, driven by renewed safe-haven demand after signals from Donald Trump on a possible peace agreement with Iran weighed on the dollar and crude oil, easing inflation concerns.
Following an Axios report which claimed that the US and Iran are closing in on a "one-page memorandum" to end the war, the metal rates soared 3.16% to $4,702.3 per ounce, touching its highest level since April 28. On the Multi Commodities Exchange, gold futures were trading nearly 2% higher at Rs 152,633 per 10 gram.
Earlier on Tuesday, Trump said that the US would briefly pause operations to escort ships through the Strait of Hormuz, citing progress toward a broader agreement with Iran.
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Iran, however, struck a cautious tone, with its foreign minister stating on Wednesday that Tehran would only accept a “fair and comprehensive agreement” in ongoing negotiations with Washington.
“Oil prices retreated on reduction in geopolitical risk premium, after the U.S. confirmed that the ongoing fragile ceasefire with Iran is still intact, despite skirmishes earlier this week,” Kelvin Wong, senior market analyst at OANDA, said.
He added that any signs of renewed tensions could trigger profit-taking in gold, with short-term investors likely to unwind bullish positions.
A softer U.S. dollar also supported bullion, making dollar-denominated commodities cheaper for holders of other currencies.
Meanwhile, easing crude prices have tempered inflation concerns. Elevated oil typically fuels inflation and raises the likelihood of higher interest rates, factors that can dampen gold's appeal by boosting returns on yield-bearing assets.
Market participants are now turning their focus to upcoming U.S. non-farm payroll data later this week, which could offer cues on the Federal Reserve's policy trajectory.
“Factors such as economic growth risks, worsening geopolitical relations, currency volatility and downside risks to equity markets will continue to support gold's role as a portfolio diversifier,” analysts at ANZ said in a note.
Among other precious metals, spot silver rose 4.6% to $76.16 per ounce, platinum gained 2.9% to $2,009.25, and palladium advanced 2.4% to $1,521.50.
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