Gold prices touched a four-week high in early Wednesday trading before giving up those gains and retreating to a level just above $4,800. The precious metal started the week on the front foot, rising more than 4.5% over the previous two sessions, with support driven mainly by the weakening of the US dollar. The greenback has lost ground against other major currencies as expectations of a Federal Reserve rate hike have started to recede after US inflation figures for March, despite an uptick from the previous reading, came in lower than feared. This suggests that the impact of higher energy prices caused by the war in Iran has had less effect on inflation than previously expected. Against this backdrop, and with growing hopes that a diplomatic resolution will bring forward realistic prospects for a lasting ceasefire and allow for the normalisation of traffic through the Strait of Hormuz, there could be further downside for the US dollar, which in turn could create scope for additional gains in gold prices. Nevertheless, the situation remains volatile, and any escalation in the Persian Gulf could shift investors’ focus back to inflation and weak growth, a dynamic that is dollar-positive and continues to hold gold bulls back.
Ricardo Evangelista, ActivTrades

Source: ActivTrader
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