Gold Prices Surge as US-Iran Talks Ease Inflation Fears

The US-Iran negotiations have led to a significant reduction in inflation fears and a surge in gold prices. Spot gold briefly breached $4,300 per ounce, triggering a long-absent surge in Taiwan-listed gold ETFs. The Yuanta S&P Gold 2x ETF (00708L) soared over 5% on the 6th, with its market price hitting a new high since June 18.

Cooling US rate hike expectations and a weakening US Dollar Index have contributed to the increase in gold prices. The Yuanta S&P Gold 2x ETF led all ETFs with a surge of 5.32%, followed by the Yuanta S&P Gold ETF (00635U) closing up 2.88% and the Yuanta DJ Commodity Silver ER Futures ETF (00738U) gaining 1.57%. Looking at the weekly performance, 00708L, 00635U, and 00738U surged 10.29%, 5.33%, and 7.95%, respectively.

The World Gold Council's report shows that global central bank net gold purchases reached 289 tonnes in the second quarter, a year-over-year increase of 62%. Central banks are planning to increase their gold reserves within the next year, with 45% of respondents indicating they will do so. This solid downside support for gold prices is expected to continue.

CITIC Securities believes that the area around $4,000 per ounce is likely the bottom for this cycle and expects gold prices to return to an upward channel within the year. International investment banks, including Bank of America and UBS, also believe the current pullback in gold prices is not the start of a long-term bear market.