Gold jumps, investors keep their eyes on central banks

ISTANBUL- Anadolu Agency

Gold prices jumped above $4,300 an ounce on June 15 extending gains after the U.S. and Iran reached a peace agreement.

The precious metal advanced as oil prices declined to a two-month low following the announcement, reducing concerns that higher energy costs could keep inflation elevated and force major central banks to maintain a tighter monetary policy stance.

The reopening of the Strait of Hormuz, one of the world’s most important energy transit routes, is expected to ease supply concerns that had intensified during the conflict and triggered sharp moves across commodity markets.

Lower oil prices supported risk sentiment and eased inflation expectations, while gold also benefited from continued demand for safe-haven assets amid uncertainty over the implementation of the agreement.

Investors are also focused on this week’s U.S. Federal Reserve policy meeting, the first under new Chair Kevin Warsh. The Fed is widely expected to leave interest rates unchanged.

Gold is sensitive to expectations over borrowing costs. Lower or steady interest rates generally support bullion by reducing the opportunity cost of holding the metal.
Other major central banks are also in focus. The Reserve Bank of Australia is expected to keep policy steady, while the Bank of Japan is likely to raise interest rates in an effort to support the yen.

Market participants will closely monitor central bank guidance, energy price moves, and developments related to the U.S.-Iran agreement for the next direction in precious
metals.