Gold prices moved higher during Tuesday’s Asian session, climbing to around $4,660. The rebound comes as traders closely monitor developments surrounding the deadline set by Donald Trump for Iran.
Geopolitical Tensions Support Gold
The rise in gold prices follows growing concerns over a potential conflict between the United States and Iran. Tensions escalated after the closure of the Strait of Hormuz, one of the world’s most critical oil transit routes, significantly impacting global financial markets.
Trump stated that the latest ceasefire proposal with Iran is “significant” but “not good enough,” warning that failure to reopen the strait could lead to major strikes on Iran’s energy and transportation infrastructure.
Inflation Concerns and Pressure on Gold
Rising crude oil prices, driven by fears of supply disruptions, have been a key factor supporting gold. However, higher oil prices may also fuel inflation, which could influence the monetary policy outlook of the Federal Reserve.
In such an environment, expectations for interest rate cuts tend to decline. This could weigh on gold, as it is a non-yielding asset and becomes less attractive when interest rates remain high.
Interest Rate Outlook and Market Expectations
According to the CME FedWatch Tool, markets see virtually no chance of a rate change at the upcoming Federal Open Market Committee (FOMC) meeting in late April. Additionally, there is a 77.5% probability that the Federal Reserve will keep rates unchanged through the end of the year.
Conclusion
Overall, gold continues to find support from geopolitical uncertainty as a safe-haven asset. However, rising inflation expectations and a more cautious stance from central banks may limit its upside potential. Market participants are now focused on US political and military decisions regarding Iran, as well as the future path of interest rates.
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