Gold surged to a level close to a three-week high. This came as President Donald Trump decided to put a hold on US airstrikes against Iran for two weeks.
Gold futures for delivery in June increased by 3.4% to reach $4,841.60. It was revealed by Trump that US authorities had received a ten-point proposal from Iran via Pakistan. It could serve as a good platform for negotiations. Earlier, Trump had told Iran that it must open the Strait of Hormuz. Otherwise, it would be met with harsher measures.
Pakistan’s Mediation Creates Breathing Space
Also significant was the involvement of Pakistan in making such a request. This was aimed at giving diplomacy a real chance to work. The Iranian government has confirmed that talks between Iran and the U.S. will officially start on April 10 in Islamabad. Nevertheless, a ceasefire does not necessarily imply a conclusion of the struggle.
The independent metals trader, Tai Wong, viewed this sudden jump as a knee-jerk rally. “Only time will tell whether Iran will comply or not. For gold, I see the 200-day moving average of $4,930 followed by $5,000 as the critical levels. Likewise, for silver, $80-$81 will prove vital.”
Metals Rally as Inflation Worries Ease
Moreover, the truce helped alleviate fears of disruptions to global oil trading. Such disruptions could send inflation higher. According to analysts, persistent issues in the Strait of Hormuz could increase US inflation to 4 percent by year-end. Although gold is considered the classic safe haven amid uncertainty, its appeal tends to wane with persistently elevated interest rates.
Gold is down nearly 8 percent from when the crisis began on February 28. However, today’s price increase demonstrates the return of investor interest. Market participants will now be looking ahead to the minutes of the March FOMC meeting. These are due later today.
The prices of other precious metals have surged as well. Spot silver gained 4.9 percent to trade at $76.48 an ounce. Platinum rallied 3.2 percent to $2,020.57 an ounce. Palladium advanced 4.1 percent to trade at $1,529.35 an ounce.
