Gold declines as markets focus on US negotiations

Gold fell today, as investors monitored the impact of the conflict in the Middle East and the faltering peace talks between the United States and Iran on expectations of interest rate decisions from central banks meeting this week.

Gold in spot transactions fell 0.2 percent to $4,670.89 per ounce by 03:50 GMT.

US gold futures for June delivery fell 0.2 percent to $4,684.70.

A US official said that US President Donald Trump is not satisfied with the latest Iranian proposal to end the two-month-old war, which weakened hopes for reaching a settlement to the conflict that affected the flow of energy supplies, exacerbated inflation and claimed the lives of thousands.

Edward Meir, an analyst at Marex, said: “Geopolitical developments are still the main driver (of gold prices). In the event of an agreement (between the United States and Iran) or a temporary agreement being reached, the dollar is expected to fall and gold is likely to rise.”

The dollar rose and oil prices hovered above $109 per barrel, as the vital Strait of Hormuz remains almost completely closed.

High crude prices could stoke inflation by raising transportation and production costs, which increases the likelihood of raising interest rates.

While gold is a hedge against inflation, rising interest rates make yield-generating assets more attractive, which reduces the attractiveness of gold.

The Federal Reserve is largely expected to keep interest rates unchanged tomorrow, Wednesday, at the end of its two-day meeting.

Investors will also focus on other central bank decisions this week, including the European Central Bank, the Bank of England, and the Bank of Canada.

As for other precious metals, silver fell in spot transactions 1.2 percent to $74.61 per ounce, platinum stabilized at $1,984.19, and palladium fell 0.9 percent to $1,463.