Gold prices extended gains on Wednesday morning as a fall in oil (BZ=F, CL=F) eased concerns about inflation and the outlook for higher global interest rates.
Read more: Stocks rise on reports of Trump offering 15-point ceasefire plan to Iran
Gold futures (GC=F) rose 3.7% to $4,564.50 a troy ounce, while spot prices gained 3.4% to $4,565.00 at the time of writing.
Oil prices retreated after US president Donald Trump said on Tuesday that Washington was making progress in negotiations to end the conflict with Iran.
Read more: Should you invest in gold?
Christopher Wong, a strategist at OCBC, said: “Near-term, gold is likely to stay sensitive to Federal Reserve policy path expectations, USD and geopolitical developments, but the rebound suggests dips may continue to find support unless real yields move meaningfully higher.”
Investors have trimmed expectations for US Federal Reserve rate rises by December to about 16% from 25% on Friday.
Read more: UK inflation held at 3% ahead of Iran war
While rising inflation typically supports gold as a hedge, higher interest rates tend to weigh on demand for the non-yielding asset.
JP Morgan said in a note: “Despite gold prices trading ~17% below pre-conflict levels amid USD strength and broad-based de-risking, this flush has historically been a tactical dip to buy, and the bullish case strengthens the longer the conflict persists.”
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