Gold Prices Trend Upward Amid U.S.-Iran Deal, Fed Rate Hike Concerns

Gold prices climbed on Thursday, driven by safe-haven demand as a temporary U.S.-Iran agreement reduced inflation expectations by lowering oil prices. The precious metal continued its upward trend, finding support from these safe-haven purchases.

Gram gold reached 6,451 Turkish lira, quarter gold 10,814 lira, and Cumhuriyet gold 43,092 lira. Spot gold rose 1.4% to $4,316.42 per ounce, reversing some of Wednesday's 1.7% loss. August U.S. gold futures fell 1% to $4,336.70.

Analysts attribute the short-covering rally to positive Middle East news that lowered oil prices. However, Kelvin Wong, Senior Market Analyst at OANDA, suggests that gold's upward potential may be capped. "Given that market participants are now pricing in a higher probability of the U.S. Federal Reserve resuming its interest rate hike cycle, I expect gold's upward movement to remain limited," Wong stated.

“

We are seeing short-covering moves on the gold side after yesterday's sharp decline. The reason for these short-covering moves is the positive news coming from the Middle East; because these developments have led to a decrease in oil prices.

The U.S. Federal Reserve's projections indicate strengthening expectations for interest rate hikes within the institution. Nine of the Fed's 19 policymakers suggested an additional rate hike might be necessary this year. CME FedWatch data shows markets pricing an 85% chance of a Fed rate hike in December, up from 61% before the decision. Higher interest rates typically pressure gold, a non-yielding asset.

Other precious metals also saw gains, with spot silver rising 1.8% to $69.18 per ounce, platinum increasing 1.2% to $1,757.53, and palladium gaining 1.3% to trade at $1,329.99.

“

Given that market participants are now pricing in a higher probability of the U.S. Federal Reserve resuming its interest rate hike cycle, I expect gold's upward movement to remain limited.