WASHINGTON (dpa-AFX) - After ending roughly flat yesterday, gold prices have surged on Tuesday as investors assessed the possibility of the U.S. and Iran returning to peace talks and pausing their mutual attacks. In addition, reports indicating active gold purchases by major central banks supported gold prices.
Front Month Comex Gold for August month delivery has soared by $58.50 (or 1.46%) to $4,074.40 per troy ounce.
Front Month Comex Silver for August month delivery also has skyrocketed by $1.932 (or 3.40%) to $58.810 per troy ounce.
U.S. forces continued their strikes on Iran for the 10th consecutive day.
Yesterday, citing a senior Iranian official, Reuters reported that Iran is in receipt of a proposal from mediators that primarily includes a 10-day ceasefire to the current exchange of attacks.
Today, Iran's Interior Minister Eskandar Momeni arrived in Pakistan where he met Pakistan's Army Chief, Field Marshal Asim Munir and held closed door talks. Later, Momeni had discussions with Pakistan's Prime Minister Shehbaz Sharif.
Analysts are of the view that Iran is liaising with Pakistan to save the collapsing interim deal struck between the U.S. and Iran on June 17.
The Memorandum of Understanding signed between both nations is now in a state of suspension after U.S. forces launched strikes on Iran in retaliation to Iran firing at vessels transiting via the Strait of Hormuz without coordinating with Iranian authorities.
Iran counter-attacked various U.S. bases in the gulf region, especially in Kuwait, Bahrain, and Jordan.
On Monday evening, U.S. Central Command (CENTCOM) announced that U.S. forces conducted a new wave of strikes on Iran with an intent to neutralize the capabilities of Iran's Islamic Revolutionary Guards Corps to target commercial shipping in the Strait of Hormuz.
Various Iranian media outlets reported multiple explosions and published videos revealing heavy airstrikes at several places in Iran.
The ongoing military confrontation has virtually crippled the shipping traffic across the Strait of Hormuz.
Iran announced the closure of the strait after the conflict renewed recently and has not given up its control over the Strait of Hormuz since then.
Despite the U.S. military's assurance to escort ships safely in and out of the Persian Gulf, shipowners are avoiding the corridor fearing being struck in the U.S.-Iran crossfire.
According to a Lloyd's List Intelligence report, nearly 53 vessels transited in the region through July 20, a sharp decline from 157 of the previous week. Tankers and gas carriers that transport crude oil and Liquefied Natural Gas dropped to 30 crossings from the previous 90. On Sunday, only three ships had passed through the strait.
Similarly, Kpler's data showed that daily crossings fell day after day. Prior to July 15, it was nearly 20 which later slid to 16 on July 15 and then dropped to single digits on July 16.
Oil-linked inflationary pressures continue to keep up expectations of a high interest-rate regime in the U.S. at least in the near-term and probably through the year-end.
Despite the chances of higher interest rates weighing on gold, yesterday a new Goldman Sachs note recorded that central banks remain bullish on gold as seen by their robust buying in the recent months.
The bank reported that official buyers purchased roughly 81 tons of gold in the month of May. China alone had purchased 48 tons.
Over the past three-month period, central banks bought at a seasonally adjusted 67 tons per month.
At the core of the discussion, the bank argues that central banks' purchases are no longer for short-term trading instead they consider gold as a strategic reserve asset.
Strength in the U.S. dollar value capped the gains on gold. The U.S. dollar index was last seen trading at 101.11, up by 0.16 (or 0.16%) today.
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