Gold rises as oil declines

Spot gold rose 0.9% to settle at $4,475.41/oz, while gold futures added 0.8% to $4,502.25/oz

Gold prices inched up on Thursday, helped by a slightly weaker dollar and sliding oil prices.

Spot gold rose 0.9% to settle at $4,475.41/oz, while gold futures added 0.8% to $4,502.25/oz.

The ceasefire announcement calmed tensions somewhat that had risen this week amid new strikes between Iran and the U.S. and stalled progress on peace talks.

The ceasefire has raised hopes that Iran will return to the negotiating table, as one of its conditions for resuming talks was that Israel halts its war in Lebanon. While both the U.S. and Iran have looked past each other’s ceasefire infractions since April, that may not prove to be the case with Israel and Hezbollah. Time will tell, David Morrison, senior market analyst at Trade Nation, said.

The White House is also possibly facing escalating demands at home to end the war. The House of Representatives, despite being controlled by Trump’s Republican party, voted in favour of a resolution blocking the president from continuing the war. The measure still needs Senate approval, as well as the backing of two-thirds majorities in both chambers to override a veto from Trump.

Against this backdrop, oil prices snapped a three-day win streak on Thursday, helping ease inflationary pressures. Surging crude prices have led traders to significantly increase their expectations for U.S. central bank interest rate hikes and sell government bonds, sending Treasury yields higher. But solid U.S. economic data this week on the labour market has contributed to easing rates, with the focus on Friday’s closely-watched May nonfarm payrolls report.

Higher interest rate environments tend to weaken non-yielding assets such as gold.

We expect most central banks across developed markets—including the Federal Reserve, Bank of England, and others—to keep rates unchanged in the near term, analysts at UBS said in a note.