The price of gold rose, supported by the signing of a temporary peace agreement between the United States and Iran, despite the Federal Reserve indicating that it would raise interest rates later this year.
The price of the precious metal rose by as much as 1.7% to reach $4,328 an ounce, reducing its decline in the previous session.
US and Iranian officials signed the peace agreement electronically on Wednesday evening, but it was not yet clear whether the Strait of Hormuz had been reopened.
Oil prices fell on expectations that the agreement would ease the global energy crisis that had fueled inflation and raised expectations of higher interest rates. However, uncertainty remains regarding how quickly fuel prices will fall and when shipping traffic through the strait will return to pre-war levels.
Christopher Wong, a strategist at Overseas-Chinese Banking, said: The decline in oil prices is still helping to some extent. However, the outcome of the Federal Reserve meeting complicates the picture and calls for caution regarding gold in the short term, although the supportive factors in the medium term have not disappeared.
Tightening monetary policy by October
The Federal Reserve kept interest rates unchanged on Wednesday, asserting that they would stabilize prices, and removed any mention of further rate adjustments from its statement. Traders now anticipate a tightening of monetary policy by October. Higher interest rates put downward pressure on precious metals, which do not offer a yield.
Regarding gold, Ryan McKay, senior commodities strategist at TD Securities, noted in a memo that expectations of an interest rate hike were already high even before the Federal Reserve's latest decision. He added: The overall trend remains bearish for gold... suggesting that a significant shift in the Fed's outlook may be necessary to alter the fundamental market sentiment for precious metals.
Spot gold rose 1.2% to $4,307.71 an ounce by 3:21 p.m. Singapore time. Silver climbed 1.5% to $68.86, after falling 3% in the previous session. Platinum and palladium prices also rose. The Bloomberg Dollar Index slipped 0.1%, after rising 0.7% in the previous session.
