The gold price held steady on Tuesday as news of the successful conclusion of the negotiations between Iran and the P5 + 1 nations was announced.
Gold for August delivery fell by 0.10% to $1154.30 per ounce while futures traded in a narrow band between $1151.90 and $1158.70. The precious metal has now lost approximately 4% since 19 June when it opened above $1200.
The weaker oil price, which resulted from the Iran deal, had very little effect on the gold price as it gained support from the $1144.80 low it saw on 13 July. Most analysts polled by Kitco are not expecting the gold price to track the weaker oil prices.
Meanwhile, Commerzbank commodity analyst, Eugen Weinberg, warned investors not to overestimate the link between gold and oil as the two are reacting to very different scenarios following the Iran deal.
His reasoning is that the oil price is a victim of an oversupply situation which is becoming worse which will not impact the gold price. Gold on the other hand is more focused on if and when the Federal Reserve is expected to hike interest rates.
The fear of a resumption of oil production in Iran, as a result of the deal, was a further factor aggravating oversupply fears.
Precious metals analyst at Natixis, Bernard Dahdah, agreed with Weinberg with regard to the effect of oversupply on the oil price. He expressed the view that the Iran deal could exert downward pressure on the gold price as geopolitical tensions decrease as a result of the agreement. This would reduce the need for holding gold as a safe-haven asset.
Kitco also reported that the link between gold and oil was more noticeable last week as weakness in the copper and oil price dragged all the precious metals down. Analysts explained that the fundamentals causing last week’s weakness and Tuesday’s price decline, were very different.
Also, RBC Capital Markets Global Futures precious metals analyst, George Gero, said, “Last week oil prices fell because investors were worried about weaker growth in China and the selloff in gold was margin related.” He added that, “investors and managers needed to sell their liquid investments to raise much needed cash.”
MT4 Chart: Gold