(Bloomberg) — Gold steadied after a two-day gain as traders weighed the prospect for a diplomatic resolution to the Iran war, even as sporadic fighting threatened to derail a fragile ceasefire.
Bullion was near $4,715 an ounce, having gained 1.5% over the previous two sessions. The White House said the US would hold direct talks with Iran, while Tehran cast Israeli attacks in Lebanon as a violation of a day-old ceasefire and kept up strikes on Gulf states. The Strait of Hormuz remained largely blocked despite Iran’s assurances of safe passage.
Oil rebounded after its biggest one-day drop since April 2020, while stocks gained and a gauge of the dollar fell on Wednesday, supporting gold that’s priced in the US currency. Bullion has traded largely in tandem with stocks since the war began nearly six weeks ago, with its haven appeal dimmed by some investors’ need to cover losses elsewhere.
Now in its sixth week, the war has driven a spike in energy prices and raised inflationary risks, making it more likely that central banks will delay cutting interest rates or even hike them. This is a headwind for non-yielding gold, which benefits when borrowing costs are low.
Countering this, however, a protracted war could also lead to a slowdown in growth, hurting the labor market and warranting lower rates. Minutes of the Federal Open Market Committee’s March 17-18 meeting released Wednesday showed policymakers wrestling with these starkly different scenarios for the US economy.
Spot gold edged 0.1% lower to $4,715.10 an ounce at 6:13 a.m. Singapore time. Silver slipped 0.3% to $73.83. The Bloomberg Dollar Spot Index, a gauge of the US currency, ended the previous session down 0.8%.
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