Gold Prices Hold Steady Amid Unclear Signals on Iran Conflict

Gold held onto a decline as mixed signals about ending the Iran war created uncertainty for inflation and future interest rates set by the Federal Reserve. Bullion traded near $4,115 an ounce after dropping more than 1% since the week began. Oil remained steady after dropping from a five-month high on Tuesday when a diplomat stated that reports of a near-complete peace agreement were wrong. Gold has dropped about a fifth since the US-Iran conflict started in late February, which drove energy prices up and raised inflation worries. Higher borrowing costs hurt gold because the metal does not pay interest. Long-term US Treasuries rose on Tuesday following oil's drop and signs of a slowing economy. Recent data showed September housing starts fell, and pending home sales hit a record low. Traders are looking for clues ahead of the central bank meeting next week. Fed Chair Kevin Warsh did nothing to change expectations that the bank will hold interest rates steady in a speech on Friday. The chance of a quarter-point rate hike is currently less than one-in-six. Even so, inflation stays well above the 2% target, and traders see an 85% chance of another rate increase later in the year. Spot gold dropped 0.2% to $4,117.83 an ounce in Singapore, and silver fell 0.1% to $57.88. Platinum and palladium also dropped slightly, while the Bloomberg Dollar Spot Index stayed mostly flat.

Context

Gold and other precious metals often react strongly to global conflicts and changes in US interest rates. When inflation stays high or borrowing costs go up, investors frequently shift money away from assets that do not pay regular interest.