Gold price prediction: Will gold prices rise from current levels? Check outlook
Gold can extend its rally further in the short-term as oil prices remain under pressure. (AI image) Gold Performance Spot gold rallied hard on Monday
Gold can extend its rally further in the short-term as oil prices remain under pressure. (AI image) Gold Performance Spot gold rallied hard on Monday as it extended its winning streak to the third day with the US and Iran reaching a MoU to end the Middle East conflict. The tentative deal/MoU is to be signed on June 19 in Geneva, Switzerland. Although many crucial details are yet to be known, as per the framework of the MoU, Iran will open the Strait of Hormuz in thirty days as the US lifts its blockade. Crude oil prices slumped as oil flow through the Strait could be normalized. Consequently, yields and the Dollar Index eased. Spot gold, at the time of writing this article, was trading with a daily gain of 3.24% at $4356. In the week ending June 12, it closed with a steep weekly loss of 2.51% at $4219. Geopolitics and oil The preliminary deal between the US and Iran, which will facilitate the sixty-day ceasefire, can be construed as a deal to open the Strait of Hormuz. Many sticky and thorny issues viz sequencing of incentives for Iran, control of the Strait, Iran's nuclear programme, reconstruction of Iran, etc. are yet to be resolved. Iran's 14-point draft of the MoU also includes a $300 billion Iran reconstruction fund. As per the deal, Israel will cease fighting in Lebanon. Israel is opposed to the deal as it was concluded without Israel's participation. Iran's news agency Fars reported that Iran will allow vessels to transit free of charge for only 60 days; thereafter, Iran will charge for safety, navigation and environmental and insurance services. Iran and Oman will control the traffic in the Strait. Saudi Arabia has expressed its reservations against Iran generating revenue by charging the vessels. The US VP Vance said that transit through the Strait of Hormuz will be toll-free in the long term.
The US President Trump has said that Iran will not charge for transit through the Strait of Hormuz. Iran has stated that billions of US Dollar of its frozen fund will be made available before the negotiations occur. Iran also wants all the primary and secondary sanctions to be lifted in negotiations during the ceasefire period. Several key issues like Iran's ballistic missiles and its proxies, which were cited as major reasons by Israel and the US behind the war, have not figured in the MoU talks. Terms of the MoU are likely to be published once the deal is signed on Friday. Critics are not too enamoured with the deal; they do not see this deal bringing long-term stability to the region. Iranian negotiators may face hurdles in selling deals to hardliners at home as trust between the two nations is running low. It appears that Trump, who criticized the Obama-era nuclear deal that he went on to dismantle, may end up offering even more concessions for a much more limited potential nuclear deal. Brent Crude oil prices sank 5% to $82—lowest since March 10. Data roundup US Empire manufacturing in June came in at 5.7 Vs the estimate of 13.7 (prior 19.6), while industrial production stagnated in May (forecast 0.3%, prior 0.7%). NAHB Housing Index came in at 35 (forecast 37, prior 35) in May. Dollar Index and yields The US Dollar Index fell for the third consecutive day on June 15 as crude oil prices tumbled. At the time of writing this article, the Index was hovering around 99.58, down 0.15% for the day. Two-year US yields, which fell 1.5% last week, fell 1% to 4.03% as investors pared back their rate hike expectations. Ten-year US yields, following a weekly decline of 1.5% last week, were down 3 bps to 4.45% on Monday.
The BriefWire