Gold and Silver Prices Soar: Will the Surge Last?
Jakarta, CNBC Indonesia - Gold and silver prices soared as hopes for a peace deal to end the Iran conflict strengthened. A weaker dollar also boosted demand for gold.
According to Refinitiv, gold closed at $4,570.56 per troy ounce on Monday (25 May 206), surging 1.37%. This rise contrasted with a 0.8% drop on the previous Friday.
Gold prices stabilised today. On Tuesday (26 May 206) at 06:42 WIB, gold fell 0.16% to $4,563.03 per troy ounce.
Spot gold rose 1.2% to $4,561.51 per ounce at 13:19 GMT, while US June futures contracts gained 0.9% to $4,563.60 per ounce. US markets were closed for Memorial Day.
Markets remained optimistic despite the US and Iran downplaying the likelihood of a near-term deal. Previously, US President Donald Trump said on Saturday that the two nations had largely negotiated a memorandum of understanding regarding an agreement that would reopen the Strait of Hormuz.
However, both sides remain at odds over several difficult issues that need resolution to end the three-month conflict.
Stock markets rose, while oil prices fell below $100 per barrel, hitting a two-week low. The US dollar also traded near its lowest level in a week.
“Financial asset markets are currently heavily influenced by oil prices, and gold is no exception,” said UBS analyst Giovanni Staunovo, quoted by Refinitiv.
“Lower oil prices support gold as markets anticipate this will affect Federal Reserve monetary policy,” Staunovo added, noting he expects the trend to continue in the short term.
Gold prices have fallen around 14% since the Iran conflict began in late February, driven by high energy prices sparking inflation concerns and expectations of US interest rate hikes.
Market participants now see a 40% chance of the Fed raising US interest rates by 25 basis points in December. This is a stark reversal from pre-conflict expectations, when many economists predicted two rate cuts this year.
Kevin Warsh was officially sworn in as Fed Chair on Friday amid a critical moment for the US economy, as Middle East conflict-driven petrol price surges sparked inflation and weakened consumer sentiment.
“Trump has boosted market hopes of a potential Iran deal, which could reopen the Strait of Hormuz. This outlook has pressured oil prices and ultimately provided a positive boost to gold on inflation prospects,” said KCM Trade Chief Market Analyst Tim Waterer to CNBC Indonesia.
US Secretary of State Marco Rubio said on Monday that the US would reach a good deal with Iran or confront the country “in another way”.
The US dollar traded near its weekly low, making dollar-denominated gold cheaper for holders of other currencies.