Gold climbs while oil declines, yet conflicting signals from Iran and shifts in currency trends make gold’s trajectory more complex – ING

Gold and Oil React to Ceasefire Developments Amid Ongoing Uncertainty

Recent efforts toward establishing a ceasefire in the Iran conflict have sent gold and oil prices in opposite directions, according to ING's commodity strategists. While gold has benefited, the ongoing volatility and currency fluctuations triggered by the conflict continue to complicate the outlook for the precious metal.

In their latest analysis, ING strategists Warren Patterson and Ewa Manthey observed that gold has been climbing as energy prices retreat. They highlighted that oil prices dropped sharply following news of renewed ceasefire negotiations, with Brent crude tumbling as much as 7% to approach $97 per barrel before recovering some losses, and WTI hovering near $89 per barrel. The market responded to reports of a 15-point peace proposal drafted by the US and reportedly relayed to Iran through Pakistan, though the specifics remain unclear.

Despite this initial optimism, the strategists cautioned that uncertainty persists due to ongoing signs of escalation. Tehran recently launched another missile barrage toward Israel and has shown little inclination to compromise. Additionally, Iran reiterated that foreign vessels may only pass through the Strait of Hormuz if they adhere to Iranian regulations and are not involved in hostile activities. The US, meanwhile, has deployed approximately 2,000 troops from the 82nd Airborne Division to the region, highlighting the risk of further conflict.

Heightened Volatility and Geopolitical Premium

According to ING, market volatility remains high and geopolitical risks continue to drive a premium in prices. Persistent tensions are fueling inflation worries and reinforcing expectations that central banks may postpone monetary easing or even consider tightening policies.

Gold Extends Rally as Oil and Dollar Weaken

Gold has continued its upward momentum for a second consecutive session after ending a nine-day losing streak, with prices rising above $4,600 per ounce early Wednesday. The strategists attributed this strength to remarks from US President Trump, who suggested Iran had made a goodwill gesture related to energy flows through the Strait of Hormuz, as well as diplomatic signals from China supporting negotiations. Softer oil prices and a weaker US dollar have also provided a boost to gold.

Looking ahead, ING expects gold to remain highly responsive to shifts in Federal Reserve policy expectations, currency fluctuations, and geopolitical events. The risks remain elevated as Iran maintains control over the Strait of Hormuz and Israel continues its operations targeting Iranian interests. The recent US decision to send an additional 2,000 troops to the region further underscores the tense environment.

There are also early indications that some central banks, especially those facing higher energy import costs, may consider using their gold reserves to help stabilize their currencies. Turkey's central bank, for instance, is reportedly preparing measures to counteract war-related volatility in the lira.

After reaching an overnight high of $4,602.64, gold has successfully tested support near $4,530 per ounce and remains in the upper range of its daily trading band.

Spot gold was last quoted at $4,557.93 per ounce, marking a 1.87% gain for the session.