Gold Holds Steady as Markets Weigh Middle East Truce Hopes and Fed's Rate Path

Gold prices are holding firm this Thursday, as global investors cautiously monitor developments in the Middle East and keenly await clearer signals regarding the US Federal Reserve's future interest rate decisions.

Bullion traded near $3,335 an ounce in early Asian hours, building slightly on its modest gains from Wednesday's close. The precious metal's stability comes amid mixed messages regarding the Israel-Iran situation. US President Donald Trump stated that American and Iranian officials are set to meet next week and declared that Israel's conflict with Tehran was "effectively over," yet simultaneously issued a warning that fighting "could maybe start soon." This dual narrative is keeping market participants on edge, preventing any drastic shifts in gold's safe-haven appeal.

Adding to the complexity are comments from Fed Chair Jerome Powell, who acknowledged the central bank's ongoing struggle to ascertain the full impact of Trump's tariff agenda on consumer prices. Should inflation figures remain subdued, it could potentially prompt the Federal Reserve to implement monetary easing sooner than anticipated. Such a move would typically be beneficial for non-interest-bearing assets like gold, making it a more attractive investment.

Compounding the uncertainty surrounding the Fed's trajectory, the Wall Street Journal reported that President Trump, reportedly frustrated by the central bank's cautious approach to rate cuts, is considering naming a replacement for Powell by September or October. This speculation could introduce further volatility into financial markets.

After a blistering rally that saw gold prices soar by more than a quarter this year, the momentum has somewhat tapered off in recent months. This slowdown is attributed to easing trade tensions and a perceived hesitancy among investors to enter the market at current elevated levels. However, strong demand from central banks globally and persistent expectations for future rate cuts have continued to provide underlying support for bullion. Gold is currently trading approximately $160 short of its all-time record high reached in April.

As of 8:10 a.m. Singapore time, gold was up 0.1% at $3,334.95 an ounce, following a 0.3% rise on Wednesday. Concurrently, the Bloomberg Dollar Spot Index registered a slight decline of 0.2%, which typically makes dollar-denominated gold more appealing to international buyers. Other precious metals, including silver, palladium, and platinum, also saw increases.