WASHINGTON (dpa-AFX) - Gold prices have edged higher on Wednesday as the upcoming U.S.-Iran deal signing on Friday continued to revive market spirits, while the focus of investors also turned to the interest rate announcement by the U.S. Federal Reserve. However, today's strength in U.S. dollar capped the gains.
Front Month Comex Gold for August month delivery has risen by $27.90 (or 0.64%) to $4,382.30 per troy ounce.
Front Month Comex Silver for August month delivery has climbed by $0.614 (or 0.87%) to $70.905 per troy ounce.
After U.S. President Donald Trump's announcement on Sunday of an agreement between the U.S. and Iran to end their nearly three-and-a-half month war, gold prices continued to gain momentum. The signing of the U.S.-Iran deal is scheduled for Friday in Switzerland.
Since the Memorandum of Understanding allows immediate reopening of the Strait of Hormuz after clearing of the sea mines planted by Iran, the prospects of the free flow of oil from Arab countries enthused market participants.
According to reports, both countries have agreed to adopt a 60-day ceasefire period during which negotiations on all critical issues that started the conflict would be discussed.
Since the start of the U.S.-Israel versus Iran war on February 28, oil-related inflationary pressure prevented major central banks of the world including U.S. Federal Reserve from considering lowering interest rates.
Gold prices bore the brunt of elevated rates. Overseas buyers refrain from buying gold during high interest periods as it is a non-yielding asset.
Investors await the decision by the Federal Reserve today at the conclusion of the two-day meeting of the Federal Open Market Committee. Currently, the interest rates are in the 3.50% to 3.75% range.
This is the first meeting presided over by new Fed Chair Kevin Warsh, who replaced Jerome Powell last month. Warsh was selected by Trump and is known to be a proponent of a low-interest rate regime.
While expectations on a rate cut have vanished, investors are eager to gain insights on the Fed's policy and its assessment of the economy from Warsh's address to the press around a half hour after the announcement.
Today, Trump warned that the MoU is not going to be a final one, and if he does not meet his expectations, he may re-order dropping bombs on Iran.
On the economic front, the Mortgage Bankers Association of America revealed that the Purchase Index in the U.S. decreased to 170.80 on June 12 from 176.90 of the previous week.
According to the U.S. Census Bureau, retail sales increased 0.90% month on month in May, higher than a downwardly revised 0.40% rise in April, and above forecasts of 0.50%. On an year-on-year basis, sales rose by 6.90%, reflecting a sharp acceleration from the 4.80% increase in April.
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