Gold Rises Amid Fading US Rate Hike Hopes, Fed Watch

Gold prices saw an increase for the fifth consecutive day, buoyed by optimism regarding the anticipated agreement between the United States and Iran. This sentiment led to a decline in expectations for a hike in US interest rates, as investors keenly await further details on the deal and the monetary policy meeting of the Federal Reserve (US central bank). In spot trading, gold rose by 0.3% to reach $4341.12 per ounce by 02:30 GMT, hovering near its one-week high recorded on Monday. US gold futures for August delivery also climbed by 0.2% to $4361.10, according to Reuters. Details of the interim agreement between Washington and Tehran, aimed at resolving the conflict, have begun to emerge. The US President announced that the deal precludes Iran from possessing nuclear weapons. Another US official confirmed that the agreement would allow Iran to sell oil upon its signing. In this context, oil prices fluctuated around a three-month low, following news suggesting the imminent arrival of Iranian fuel to global markets, which helped ease inflation concerns. Commenting on the situation, Ilya Spivak, Global Head of Macro Strategy at Tastytrade, stated that "the decline in oil prices contributed to lowering interest rate hike expectations. However, the rise in gold prices is losing some momentum as attention shifts towards the Federal Reserve's monetary policy announcement." Investors are eagerly anticipating the Federal Reserve's decision and statements later today, amid widespread expectations that interest rates will be kept unchanged. Spivak added: "This is the first Federal Open Market Committee meeting chaired by Kevin Warsh, and traders remain uncertain how he will reconcile his hawkish record with rising inflation and White House pressure for an accommodative shift." According to the CME Group's FedWatch tool, traders now see a 59% probability of a US interest rate hike in December, a decrease from approximately 70% last week, prior to the announcement of the US-Iran agreement. It is worth noting that gold loses its appeal as an investment when interest rates are high, given that it does not yield interest. Westpac analysts noted in a research brief that "in the long run, structural support for gold is expected to continue, driven by persistent Asian demand and ongoing central bank purchases to hedge against geopolitical and political risks." Other precious metals also extended their gains, with spot silver rising by 0.3% to $70.38 per ounce, platinum increasing by 0.5% to $1812.80, and palladium climbing by 0.3% to $1355.65.