Gold Prices Hold Steady as US-Iran Tensions Ease

The precious metals market saw a significant shift on Monday as tensions between the US and Iran eased over the weekend, leading to a sharp drop in crude oil prices. Gold prices held steady near $4,055 per troy ounce, with a marginal 0.08% gain on the day and a 1.09% advance for the week.

The easing of tensions between the two countries defused inflation fears and weakened the US dollar, making gold cheaper for buyers outside the US currency zone. This added support to gold prices, which were already being driven by growing conviction in higher gold prices among speculative investors on the COMEX.

Terminal market data shows that these investors added 4,438 contracts to their net long positions in the week through July 21, bringing the total to 123,586 contracts. Central banks also continue to provide structural support, with China's central bank purchasing an additional 14.93 tonnes of gold in June.

The Federal Reserve is set to make a decision on interest rates this week, which will have a significant impact on gold prices. Market expectations are split, with the majority anticipating a hold on interest rates but one-third seeing a hike arriving this week. Citi analysts take a more dovish view, arguing that the market is overestimating the likelihood of a hike.