Gold declines as markets await details of the agreement between America and Iran economy

Gold prices fell slightly – today, Wednesday – as investors await more details about the US-Iranian agreement and the monetary policy decision of the Federal Reserve (the US central bank) in Kevin Warsh’s first meeting as head of the bank.

• Gold fell in spot transactions by 0.14% to reach $4,325.2 per ounce, by 6:17 GMT.
• US gold futures for August delivery also fell 0.22% to $4,344.7 per ounce.

The precious metal touched its highest level in more than a week at $4,370.82 an ounce on Monday.

Details of the temporary agreement between the United States and Iran to end the war began to emerge, with US President Donald Trump announcing that the agreement ruled out Tehran possessing a nuclear weapon and an American official confirming that it would allow Iran to sell oil upon its signing.

Oil prices hovered around a 3-month low amid news that Iranian fuel may soon reach global markets, which allayed inflation fears.

“The decline in oil prices has lowered interest rate hike expectations,” said Ilya Spivak, Head of Global Macroeconomics at Tasty Live. “However, the rise (gold prices) is losing some momentum as attention turns to the Federal Reserve’s announcement of its monetary policy.”

Investors are awaiting the Federal Reserve’s decision and statements later today, amid widespread expectations that it will keep interest rates unchanged.

Spivak added, “This is the first meeting of the Federal Open Market Committee headed by Kevin Warsh, and traders still seem unsure of how he will reconcile his record of hawkishness, rising inflation, and pressure from the White House, which is demanding a shift toward easing.”

According to the CME Group’s Fed Watch tool, traders now see a 59% probability of raising US interest rates in December, compared to about 70% last week before the announcement of the agreement between the United States and Iran.

Gold loses its appeal when interest rates are high, because it does not earn interest.

“In the longer term, structural support (for gold) is expected to persist, driven by sustained Asian demand and continued central bank hedging purchases against geopolitical and policy risks,” Westpac analysts wrote in a research note.

The World Gold Council said in a report yesterday that a record percentage of central banks intend to increase their holdings of gold during the next 12 months, in a new indication of the consolidation of the role of the precious metal within official reserve portfolios amid escalating geopolitical and economic risks.

As for other precious metals:

• Silver fell 0.2% to $70.05 an ounce.
• Platinum fell 0.7% to $1,792.05 an ounce.
• Palladium fell 0.8% to $1,341.23 an ounce.