Gold prices rebounded during Wednesday's Asian trade, lifting from more than one-month lows near $4,500 recorded on Tuesday as easing geopolitical tensions and a weaker U.S. dollar supported the recovery.
By 3:50 pm AEST (5:50 am GMT), spot gold was trading 2.1% higher at US$4,650.74 per ounce.
The move higher comes as improving risk sentiment reduced demand for the U.S. dollar as a safe-haven asset.
Optimism surrounding a potential peace agreement between the United States and Iran has lifted market confidence, prompting investors to rotate away from the greenback and back into gold.
Sentiment was boosted after U.S. President Donald Trump announced a pause in “Project Freedom”, the American operation aimed at escorting stranded vessels through the Strait of Hormuz, citing progress in negotiations.
At the same time, declining oil prices have helped ease inflation concerns, reducing expectations that the Federal Reserve will maintain an aggressive monetary tightening stance.
This has added further pressure on the U.S. dollar, providing additional support for gold prices.
Looking ahead, traders will closely monitor developments surrounding the Middle East situation. Any tangible progress towards a formal agreement could extend gold’s recovery in the near term.
Market positioning ahead of key U.S. labour market data is also expected to influence price action. The upcoming nonfarm payrolls (NFP) report on Friday (Saturday AEST) could provide fresh direction for both the U.S. dollar and gold.
In the interim, attention will turn to the ADP employment change data for further clues on labour market conditions.
This follows the latest Job Openings and Labor Turnover Survey (JOLTS), which showed job openings fell by 56,000 to 6.866 million at the end of March, slightly above market expectations of 6.84 million.
