Gold Plummets As Traders React To Yesterday's Fed Announcement

(RTTNews) - Reversing yesterday's gains, gold prices have plunged on Thursday as indications from the U.S. Federal Reserve of higher interest rates for a few more months diminished the appeal of the precious metal. However, the reopening of the Strait of Hormuz following the U.S.-Iran deal signing and the eventual slump in crude oil prices limited the decline.

Front Month Comex Gold for August month delivery has plummeted by $132.60 (or 3.03%) to $4,248.80 per troy ounce.

Front Month Comex Silver for August month delivery has nosedived by $4.633 (or 6.52%) to $66.415 per troy ounce.

Yesterday, at the end of the two-day meeting of the Federal Open Monetary Committee, new U.S. Federal Reserve Chair Kevin Warsh announced the decision hold interest rates at the current level, in line with expectations.

The quarterly projections by the FOMC, also termed the "Dot Plot," showed that nine out of 19 of the central bank's policymakers expect to raise rates by the end of this year. Six of those nine anticipate at least one quarter-point hike this year.

The officials signaled that their next move would probably be to raise interest rates.

The U.S. Dollar Index was last seen trading at 100.71, up by 0.36 points (or 0.36%) supported by the FOMC projections.

In a significant development in the U.S.-Israel versus Iran war that started on February 28, U.S. President Donald Trump and Iran's President Masoud Pezeshkian signed a Memorandum of Understanding yesterday to extend the ongoing ceasefire for 60 days.

First, Trump signed the preliminary deal at the Palace of Versailles in France during a dinner hosted by French President Emmanuel Macron at the conclusion of the G7 summit.

Then, Pezeshkian, who called the deal "a message from a strong Iran", signed the document after it was sent by the U.S.

Today, as a mediator, Pakistan's Prime Minister Shehbaz Sharif signed the MoU. Along with co-mediator Qatar, Pakistan was planning to host an official signing ceremony tomorrow in Switzerland.

The deal, which went into effect yesterday, obliges the U.S. and its regional partners to ensure financing nearly $300 billion to war-damaged Iran for its reconstruction. U.S. will also waive sanctions on Iran's oil exports.

According to U.S. officials, the 14-point MoU reaffirms Iran's commitment to refrain from developing any nuclear weapons as well as the reopening of the Strait of Hormuz and reportedly allows Iran and its neighbors to work out a new arrangement regarding the management of the strait.

Iran's Foreign Minister Esmaeil Baghaei stated that Iran will monitor the full compliance of the U.S. without any leniency, and if the U.S. fails to abide by its commitment, Iran will not fulfil its commitments.

Baghaei added that contentious issues such as Iran's nuclear program and the lifting of U.S. sanctions on Iran's oil exports would be discussed during the 60-day ceasefire interval.

Data from Marine Traffic showed that nearly seven vessels transited the strait today.

With the risk premium diminishing, crude oil prices slumped today. WTI crude oil for July month delivery was last seen trading at $75.10, down by $1.69 (or 2.20%).

On the data front, the U.S. Labor Department revealed that the number of people claiming unemployment benefits eased by 4,000 from the four-month high of the previous week to 226,000 in the second week of June, roughly aligning with market expectations of 225,000.

Continuing jobless claims rose to 1,810,000 for the week ending June 6, up from a revised 1,790,000 a week before and above market expectations of 1,800,000.