Gold starts the week with gains: Markets await the Fed

In global markets, investor attention has turned to the US Federal Reserve's (Fed) interest rate decision to be announced today and the subsequent statements. The price of spot gold rose 0.3 percent to reach 4,341.12 dollars per ounce, while US gold futures for August delivery climbed 0.2 percent to 4,361.10 dollars. Thus, gold continued to hover near its highest levels of the week.

MARKETS EYE US-IRAN AGREEMENT

The details of the temporary agreement made between the US and Iran to ease tensions in the Middle East are also being closely followed by the markets. While US President Donald Trump stated that this agreement would prevent Tehran from developing nuclear weapons, a US official indicated that the agreement would pave the way for Iran to sell oil to international markets.

Following news that Iran could resume oil exports, oil prices followed a trend near their lowest levels in the last three months. This retreat in oil prices contributed to a reduction in concerns regarding inflation.

GOLD'S RISE SLOWS AHEAD OF FED

Ilya Spivak, Head of Global Macro Research at Tastylive, assessed, “The retreat in oil prices has reduced some of the upward pressure on interest rates and cooled expectations for interest rate hikes. However, with all eyes turned to the Fed's monetary policy decision, the upward momentum in gold is weakening somewhat.”

The Fed policy meeting will be held for the first time under the leadership of new chair Kevin Warsh. Investors are trying to get a clear idea of how Warsh will balance his previous hawkish stance, the rising inflation trend, and the White House's demands for softer monetary policy. Spivak noted, “This is the first FOMC meeting under the chairmanship of Kevin Warsh. Investors are still not sure how he will balance his hawkish background, rising inflation, and the White House's demand for a more dovish policy.”

NOTABLE SHIFT IN INTEREST RATE EXPECTATIONS

While no significant change is expected in interest rates, CME FedWatch data revealed that investors are now pricing in a 59 percent probability of an interest rate hike in the US in December. This rate was around 70 percent before the agreement was announced last week.

A low-interest-rate environment increases interest in gold, which does not provide interest income, while rising interest rates can traditionally overshadow the appeal of gold.

RISE CONTINUES IN PRECIOUS METALS

In addition to gold, other precious metals also continued their upward trend. Spot silver gained 0.3 percent to reach 70.38 dollars per ounce, platinum rose 0.5 percent to 1,812.80 dollars, and palladium rose 0.3 percent to 1,355.65 dollars.