Gold and Silver Up Amid US-Iran Peace Talk Hopes

 

Gold and Silver Gain as U.S. Strait of Hormuz Blockade Continues; Peace Talks in Focus

(Bullion News Network) – Gold and silver prices increased on Friday during a relatively calm trading day. The spot price of gold gained more than $18 per troy ounce on Friday, while silver added over $0.50/ozt. The price action favored silver, driving the gold-silver ratio more than 0.25% lower. In Iran, the U.S. Navy’s blockade of the Strait of Hormuz continued.

Despite the ongoing blockade, American markets performed well on Friday as investors hoped that peace talks between the U.S. and Iran could soon restart. Both the Nasdaq and S&P 500 logged fresh highs on Friday on optimism surrounding peace talks.

Steve Witkoff and Jared Kushner plan to meet Iranian negotiators in Pakistan on Saturday. The pair has led U.S. negotiations with Iran since the war began in late February. White House press secretary Karoline Leavitt told reporters that the administration hopes progress will be made toward peace.

Steve and Jared will be heading to Pakistan tomorrow to hear the Iranians out. We hope progress will be made […] The President, Vice President, and Secretary of State will be waiting here in the United States for updates.

The duo will be negotiating with Abbas Araghchi, the Iranian foreign minister, who is expected to offer a counterproposal to the United States’ original peace deal. This weekend’s negotiations will be especially high-stakes, as both the U.S. and Iran continued to vie for control over the Strait of Hormuz throughout the week.

Last weekend, Iranian forces seized two cargo ships near the Strait of Hormuz, sparking fears of renewed conflict between the country and the United States. Trump said earlier this week that U.S. forces would “shoot and kill” any ships caught dropping mines in the Strait of Hormuz. The escalation appears not to have deterred negotiation efforts from either country.

Two major points of disagreement between the U.S. and Iran include control over the Strait of Hormuz and the Iranian nuclear program. The last negotiation in April between the two countries yielded no lasting agreement, although Trump decided to indefinitely extend the ceasefire earlier this week.

Some traders may be looking ahead to next week for more definitive cues on where the war could be heading. The War Powers Act requires the executive branch to limit military engagements to 60 days before Congressional approval is required. On May 1st (next Friday), Trump could be forced to either seek Congress’ approval or significantly limit the conflict with Iran.

Domestically, short-term uncertainty surrounding the Federal Reserve tapered down on Friday after the Justice Department officially dropped its investigation into Fed Chair Jerome Powell. This is likely a good sign for Kevin Warsh, Trump’s nominee to become Chair of the Federal Reserve after Powell. GOP Senator Thom Tillis previously vowed to block Warsh’s confirmation until this investigation, which concerned supposed rising costs in the Fed’s headquarters renovations, was concluded.

In the longer term, the FOMC’s moves in the coming months could be anybody’s guess. While Trump will presumably continue to advocate that the Federal Reserve cut interest rates to stimulate the economy, sticky inflation from the war in Iran could push the central bank to keep rates unchanged – or even raise them.

For now, Warsh’s confirmation in the Senate seems highly likely.

This weekend’s peace talks will likely dominate markets heading into next week. As we approach May 1st, traders should expect heavy speculation – and maybe a considerable amount of volatility – as markets attempt to assess whether an end to the blockade of the Strait of Hormuz could be coming to an end.

Next week, the Federal Reserve will meet on Wednesday. The FOMC is widely expected to keep interest rates unchanged. After the meeting, Jerome Powell will deliver what is likely to be his final post-meeting press conference as Chair of the Federal Reserve. There is little doubt that traders will tune in to see what the economist has to say about what has been a contentious year at the Central Bank.