Gold gains as middle east de-escalation weighs on oil, the dollar and yields
Comment on behalf of Bas Kooijman is the CEO and Asset Manager of DHF Capital S.A
Gold prices rose to some extent on Monday, supported by a weaker US dollar and a broad decline in global bond yields, as markets reacted to the latest developments in the Middle East. Easing tensions in the region, as the United States and Iran paused military operations and reports emerged of new diplomatic efforts, contributed to a significant fall in oil prices.
The latter eased concerns over inflation and a more restrictive monetary policy stance. Market participants will closely monitor geopolitical developments and their impact on oil prices, as they affect monetary policy expectations and bond yields.
Several major central banks are set to decide on interest rates in an environment where oil remains volatile and its direction uncertain, leaving the precious metal at risk amid elevated global yields.
The Federal Reserve decides on rates on Wednesday, followed by the Bank of England on Thursday and the Bank of Japan on Friday. While they are expected to leave interest rates unchanged, a hawkish tilt could limit gold’s near-term upside.
Over the longer term, sustained central bank gold purchases could continue to provide a floor for prices and could help push the metal to the upside if oil prices decline in a sustained fashion.
Zaid Barem / ymm
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