Gold Price Caught in a Tug of War — Iran Talks Lift, Fed Pulls It Back Down

TLDR

Gold fell 0.7% in early New York trading to $4,218.20 but had earlier risen 1.1% in spot markets as U.S.-Iran talks in Switzerland showed progress Iran’s foreign minister said “major progress” was made, with Qatar and Pakistan mediators confirming a roadmap toward a broader agreement Lower oil prices reduced inflation fears and briefly supported gold, but hawkish Federal Reserve signals limited gains Fed Chair Kevin Warsh reinforced the view that U.S. interest rates will stay elevated for longer, pressuring non-yielding assets like gold Investors now await the U.S. Personal Consumption Expenditures report later this week for clues on the interest rate path

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Gold prices swung in both directions on Monday as two competing forces pulled the market. Progress in U.S.-Iran nuclear talks in Switzerland lifted prices early, but hawkish signals from the Federal Reserve kept a lid on gains.

Spot gold rose 1.1% to $4,205.05 an ounce in early Asian trading. By New York hours, futures had reversed course, falling 0.7% to $4,218.20 a troy ounce.

Gold Aug 26 (GC=F)

The metal is coming off three straight sessions of losses and slipped 1.4% last week.

U.S.-Iran Talks Ease Energy Fears

Talks between the United States and Iran continued in Switzerland on Monday. Iranian Foreign Minister Abbas Aragchi said “major progress” had been made during the quadrilateral discussions.

Mediators from Qatar and Pakistan said negotiators had agreed on a roadmap toward a broader agreement. Technical discussions are set to continue through the week.

The diplomacy also covered efforts to ensure safe passage through the Strait of Hormuz, a key shipping route for global oil supplies.

Progress in those talks pushed crude oil prices lower. Brent crude gave up earlier gains as diplomatic developments emerged.

Lower oil prices eased concerns about energy-driven inflation. That reduced expectations that the Fed would need to tighten policy aggressively to fight price pressures, offering some support to gold.

Fed Signals Keep Rate Expectations High

Despite the geopolitical relief, gold’s gains were capped by the Federal Reserve’s tone.

Fed Chair Kevin Warsh made hawkish remarks that reinforced the view that U.S. interest rates will stay high for longer. Markets are still digesting last week’s Fed meeting, where policymakers kept the door open to further rate increases.

Higher rates reduce the appeal of gold, which pays no yield. When investors can earn returns from bonds or savings, the case for holding gold weakens.

“While geopolitical risks should continue to provide underlying support, a higher-for-longer U.S. rate environment may limit near-term upside,” analysts at ING said.

Analysts at Saxo Bank described gold as stuck “in technical limbo” for now.

The U.S. dollar index rose 0.1% to 100.93, sitting near a 13-month high reached last week. A stronger dollar makes dollar-priced commodities more expensive for overseas buyers.

Investors are now watching for the U.S. Personal Consumption Expenditures price index report due later this week. The data is the Fed’s preferred inflation measure and could shape expectations for rate policy.

Other metals gained on the day. Silver rose 2.8% to $66.70 per ounce. Platinum climbed 1.6% to $1,694.60 per ounce. Copper futures on the London Metal Exchange edged up 0.8% to $13,700.33 a ton.

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