Key Takeaways:
Gold prices stabilized near $4,450 an ounce Thursday as conflicting signals from Washington and Tehran over a potential peace deal kept traders on edge ahead of key US inflation data.
President Donald Trump said he won't be rushed into a nuclear deal with Iran, warning that Tehran's efforts to outlast him won't work, as gold held near $4,450 an ounce and Brent crude hovered near war-era highs.
"The biggest influence continues to be the Middle East. There was some lingering optimism, but as this continues to drag out, that optimism wanes," said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Spot gold traded at $4,450.09 early Thursday, down 1.3% on the week and at its lowest since March 30. US gold futures for June delivery settled at $4,448.90. The precious metal briefly pared losses after Iran's state TV reported Tehran had obtained a draft framework for a memorandum of understanding that would restore commercial shipping through the Strait of Hormuz to pre-war levels within a month in exchange for a US military withdrawal and the lifting of a naval blockade. But the optimism faded after Trump told reporters Wednesday he doesn't "care about the midterms" and warned Iran it cannot outlast him.
The effective closure of the Strait of Hormuz — which handles about 21% of the world's seaborne oil trade — has pushed Brent crude up 31% since the US-Israeli military campaign against Iran began in late February, fanning inflation expectations and driving bets that the Federal Reserve will raise its benchmark rate by 25 basis points before year-end. Higher rates are a headwind for gold, which offers no yield. Minneapolis Fed President Neel Kashkari said Wednesday the central bank must focus on containing inflationary risks, though it was "far too soon" to predict when it could change its policy rate.
All eyes now turn to the US April Personal Consumption Expenditures Price Index, due later Thursday. The headline PCE is expected to rise 3.8% year over year, up from 3.5% in March, while the core measure — the Fed's preferred inflation gauge — is forecast at 3.3%, versus 3.2% previously. A hotter-than-expected print would reinforce the case for tighter monetary policy and could push gold below the $4,400 support level that has held since late March.
US Secretary of State Marco Rubio said Wednesday that talks with Iran have made some progress and that the US will give diplomacy "every chance to succeed." Trump, however, has kept military options on the table. Iran has simultaneously pursued a diplomatic track — engaging with the draft framework — while continuing drone and mine operations near the Strait of Hormuz that have drawn US strike responses. The last time a similar standoff over the strait occurred, during the Iran-Iraq tanker war of the 1980s, crude prices surged more than 50% over six months before a ceasefire restored flows.
Gold's trajectory hinges on two variables: whether the US and Iran reach a verifiable agreement to reopen the strait, and whether the April PCE data confirms that energy-driven inflation is accelerating. If the PCE print comes in above 3.8%, rate hike expectations could harden, pushing gold toward $4,300. If the data is benign and diplomatic progress resumes, a relief rally could lift the metal back toward $4,500. For now, traders are pricing in a 62% probability that the Fed holds rates steady at its June meeting, with the balance tilted toward a hike, according to CME FedWatch data.
This article is for informational purposes only and does not constitute investment advice.
