JAKARTA - Gold prices rose more than 2 percent on Wednesday, March 25 after oil prices fell and eased market concerns about prolonged inflation. This strengthening occurred amid reports that Washington was preparing a proposal to end the conflict in the Middle East.
CNBC quoted Wednesday, March 25, reported that spot gold prices rose 2.56 percent to US$4,588 per ounce. Meanwhile, the futures contract for April delivery jumped more than 4 percent to US$4,597.7 per ounce.
The increase came after US President Donald Trump said on Tuesday that the US and Iran "are negotiating right now". Trump also signaled that Tehran wants to reach a peace deal, although Iran denies that it is holding direct talks with Washington.
Speaking in the Oval Office, Trump said he was backing down on the threat of an attack on Iran's energy infrastructure because negotiations were underway. "They're talking to us, and they're talking sensibly," Trump said, as reported by CNBC.
After the statement, oil prices fell. Brent crude weakened about 6 percent to US$98.31 per barrel, while West Texas Intermediate fell about 5 percent to US$87.65 per barrel. The US dollar index also fell 0.17 percent in early Asian trading.
Despite strengthening, gold prices are still around 17 percent below their peak in late January.
Goldman Sachs assessed that the recent weakening of gold prices is still in line with historical patterns. The bank said higher interest rate expectations and market volatility were the main drivers of the price decline.
Head of global commodity research at Goldman Sachs, Daan Struyven, also from CNBC, said the rise in interest rate expectations was putting pressure on investor demand, especially through gold-based ETFs that are very sensitive to interest rates. He also said extreme market pressure could also put pressure on gold prices as investors who face margin calls tend to sell gold along with other assets.
Even so, Goldman is maintaining a bullish view and expects gold prices to reach US$5,400 by the end of the year, driven by central bank purchases as many countries begin to diversify assets into instruments with lower geopolitical and financial risks.
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