Gold prices edged up in early Tuesday trading, maintaining the positive momentum seen over the last few sessions. After hitting a multi-month low last week, the precious metal rebounded as investors reacted positively to reports of a peace deal between the US and Iran that could allow the immediate reopening of the Strait of Hormuz. Such a scenario, if confirmed, could allow energy prices to fall further, easing inflationary pressures and shifting central bank expectations towards looser monetary policy. This dynamic could weaken the US dollar and push bond yields lower, providing support for the non-yielding precious metal. Nevertheless, the recovery in prices appears to have lost some momentum today, as traders remain cautious given that no details of the proposed peace plan have yet been disclosed. Many will also be closely watching the Federal Reserve's FOMC meeting on Wednesday. The central bank is widely expected to keep interest rates unchanged, but investors will pay close attention to the tone of the accompanying statement and any comments from the new Chair Kevin Warsh for indications that policymakers may have stepped back from plans for further rate hikes following the latest developments in the Persian Gulf and the easing of inflation concerns. Such a scenario would likely weigh on the US dollar and provide additional support for gold.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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