Gold price drops from two-week high

Gold set a two-week high before noon Thursday on optimism over a U.S.-Iran peace deal before losing most of its gains late in the North American trading day. 

Spot gold rose 1.7% to over $4,764 an oz. during morning trading hours before sliding to $4,700 an oz. around 4:40 pm ET, about the same as on Wednesday. U.S. gold futures were trading at about $4,720 an oz. in New York. 

Bullion’s early rebound came after reports that Iran is reviewing a 14-point proposed by the U.S. government to end the war in the Middle East, which lowered benchmark oil prices to less than $100 a barrel.

But they surged again later, Treasury yields turned higher, questions arose about the stability of peace talks, and gold hit a level where selling and profit-taking took over. 

The 10-week-long conflict has so far choked off vital energy supplies flowing through the Strait of Hormuz, raising alarm bells on global inflation. This, in turn, forced central banks to suspend their monetary easing cycles, adding pressure on zero-yield assets like gold, which has fallen 10% during the war.

Data due

In the near term, attention will be placed on upcoming US data releases, which could provide further indication on the Federal Reserve’s policy path. The presidents of both the Chicago and St. Louis Feds have warned that inflation remains above the targeted 2%, signalling that an interest rate cut may have to wait.

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