What will be the new route for gold? Demand for safe haven declines
Growing expectations that peace between the US and Iran is possible have led to a decrease in safe-haven demand in the gold market, putting pressure on prices.
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Developments regarding a potential peace agreement between the US and Iran have come to the fore in gold markets in recent days. With increased confidence in the negotiations being conducted between the parties, investors have begun to reduce their demand for gold's safe-haven status. This development has caused a decline in the value of an ounce of gold.
In the spot market, an ounce of gold fell 0.2 percent to $4,534.69. On Wednesday, gold prices had tested their lowest levels since March 30, but recovered by over 1 percent by the end of the day. US gold futures for June delivery also followed a flat course at $4,536.70.
US President Donald Trump stated in a statement on Wednesday that the peace talks with Iran were approaching their final stage. While Trump noted, "We are approaching the final stage," he also stated that new military steps could be on the table if Iran does not agree to a compromise. Nevertheless, it was emphasized that the Washington administration would wait a few more days for a definitive decision.
OANDA Senior Market Analyst Kelvin Wong stated that these developments have reduced the risk perception in gold markets. In his assessment, Wong expressed that the rhetoric regarding potential progress toward peace between the US and Iran has strengthened risk appetite in the market and reduced demand for gold.
In the bond markets, it was observed that US 10-year bond yields increased by 0.3 percent, putting pressure on gold. It is known that gold, a non-interest-bearing investment vehicle, is generally found more attractive in low-interest environments. Kelvin Wong stated that US 10-year bond yields have been on an upward trend since March, which is why gold has not seen aggressive buying.
On the other hand, gold has lost more than 14 percent of its value since the end of February, when tensions between the US and Iran began to escalate. During this period, rising oil prices increased inflation concerns, while expectations that interest rates would remain high for a long time also put precious metals under pressure.
The possibility of the US Federal Reserve (Fed) raising interest rates again within the year is being closely monitored in the market. In the markets, the probability of a 25 basis point rate hike in December is priced at 39 percent. In the Fed's April meeting minutes, the view that new tightening steps could be on the agenda if inflation continues to trend above the target also came to the fore.
Interpreting gold's price movements in the short term, Kelvin Wong stated that $4,645 stands out as the resistance level and $4,456 as the support level for an ounce of gold. Wong warned that the weak trend could continue for some time.
Declines were also observed in precious metals other than gold. Spot silver fell 0.8 percent to $75.40, while platinum decreased 0.7 percent to $1,936.10. Palladium also experienced a 0.4 percent decline, falling to the $1,365.12 level.