Signals of the end of the Iran war and Fed expectations lower gold prices

Conflicting signals regarding the end of the Iran war and expectations that the US Federal Reserve (Fed) may raise interest rates led to a drop in gold prices. The spot price of gold fell to 4,108 dollars per ounce.

Gold prices declined with the opening of Asian markets on Wednesday. As conflicting signals from initiatives to end the Iran war and expectations of a potential interest rate hike by the US Federal Reserve increased pressure on the precious metal, spot gold dropped by 0.4 percent to 4,108 dollars per ounce. Gold futures also fell by 0.3 percent, decreasing to approximately 4,126 dollars. Meanwhile, the US dollar index rose by 0.1 percent to 101.80 points.

Gold has lost 20 percent of its value since the US-Iran war began at the end of February. Having lost more than 1 percent of its value since the beginning of the week, gold continues to remain under pressure due to persistently high oil prices and bond yields. Brent crude oil traded around 110 dollars per barrel, while Iranian officials announced they would not negotiate with the US unless their conditions were met.

Following statements by US Federal Reserve Chairman Kevin Warsh, and given that inflation remains above the 2 percent target, markets are pricing in a probability of about 85 percent for an interest rate hike before the end of the year. Expectations that interest rates will remain high limit investors' demand for gold.