(Bloomberg) — Gold was little changed as optimism over efforts to end the Middle East conflict eased bets on interest-rate hikes.
Bullion was near $4,540 an ounce in early trading, after gaining 1.4% in the previous session. President Donald Trump said the US is in the “final stages” with Iran. The dollar and Treasury yields retreated on Wednesday, lifting gold as it’s priced in the US currency and pays no interest.
A potential end to the war and the reopening of the Strait of Hormuz would ease inflation concerns driven by elevated energy prices, reducing expectations that global central banks will keep interest rates higher for longer. That would be positive for non-yielding bullion, which typically performs well in a lower-rate environment.
The minutes of the Federal Reserve’s latest policy meeting showed a majority of officials warned the US central bank would likely need to consider raising rates if inflation continued to run persistently above their target.
Gold has traded in a narrow range since falling sharply in the early days of the Middle East conflict, as investors weigh higher rates against the prospect of a high-inflation, low-growth scenario, which they argue should benefit gold. Bullion is down about 14% since the war began in late February.
Spot gold was down 0.1% at $4,540.78 an ounce as of 6:34 a.m. in Singapore. Silver fell 0.5% to $75.56 an ounce. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed after ending the previous session down 0.3%.
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