During the early Asian session on Thursday, spot gold prices experienced significant volatility, quickly climbing to near $4,324 per ounce, marking an intraday gain of $66. In the previous trading session, gold prices underwent a sharp correction, plummeting over $73 in a single day, a drop of nearly 1.7%, to close at $4,257.62. This rebound was primarily driven by easing geopolitical tensions. Although the Federal Reserve had previously signaled potential monetary policy adjustments within the year, market optimism remained dominant.
Reports indicate that US and Iranian officials signed a temporary peace agreement electronically on Wednesday night. This news directly pushed gold prices up by 1.7% to a high of $4,328, completely erasing the losses from the previous trading day. However, it remains unclear whether the Strait of Hormuz has reopened. Market uncertainty persists regarding the speed of fuel price declines and the timeline for shipping to return to pre-war levels. Analysts point out that the agreement is expected to alleviate global energy shocks driven by inflation and interest rate hike expectations.
Regarding monetary policy, the Federal Reserve maintained interest rates on Wednesday and removed language regarding further rate adjustments from its statement, emphasizing that this move would bring price stability. Nevertheless, traders have now fully priced in expectations for monetary tightening by October at the latest. Typically, higher interest rates are bearish for precious metals, which do not yield interest. In the first meeting under the new Fed Chair, although rates were kept unchanged, expectations hinted at later hikes boosted the US dollar, thereby pressuring gold prices.
Addressing market sentiment, a senior commodity strategist at an institution stated that expectations for rate hikes were largely priced in by the market before the latest resolution, and the overall bias remains bearish on gold. A significant change in the Federal Reserve's outlook may be required to alter the fundamental sentiment in the precious metals market. Meanwhile, industry surveys show a record 45% of reserve management institutions expect to increase their gold holdings over the next 12 months.
In addition to gold, other precious metals also showed an upward trend. Silver prices rose 1.2% to $68.75 in the early Asian session on Thursday, after plummeting 3% in the previous trading session. Platinum and palladium also recorded gains. As for the US Dollar Index, the spot index fell 0.1%, correcting the 0.7% gain from the previous trading day.
