Gold Down, Silver Gains as White House Weighs Iran Options

 

Gold Stalls, Silver Up as White House Weighs Iran Options

(Hero Bullion News Network) – The spot price of gold stalled to end the trading week on Friday, pulling back by less than $4 per troy ounce. Silver showed a bit more life, gaining nearly $2 per troy ounce to close about on par with its opening price on the week. The price action favored silver, driving the gold-silver ratio more than 2% higher.

Hostilities in Iran were a major focus at the end of the trading week. On Friday afternoon, U.S. President Donald Trump told reporters that the U.S. would not accept Iran’s newest peace proposal, which was submitted to the White House via negotiators in Pakistan earlier this week. Mr. Trump did not specify what specifically made the proposal unworkable, saying instead that he is unsure if Iran will be able to offer a feasible peace deal.

We have great respect for Pakistan and Islamabad and great respect for the Prime Minister and the Field Marshal, and they […] continue to work with us, but the trip is a very long one. We’re doing everything in terms of negotiation right now. They’ve made strides, but I’m not sure if they ever get there. There’s tremendous discord; they’re having a tremendous problem getting along with each other in Iran […] With that being said, they all want to make a deal, but they’re all messed up.

A previous proposal from Tehran was rejected. The deal would have reopened the Strait of Hormuz in exchange for an end to the U.S. naval blockade, but it postponed negotiations concerning Iran’s nuclear program until a later date. At this point, the details of Iran’s latest peace proposal are unclear.

In domestic news, the big event this week was the Federal Reserve’s interest rate decision. As expected, the FOMC voted to keep interest rates unchanged this month. The meeting was not without controversy, though. Four FOMC voters dissented, which is the highest number of dissenters since 1992. One of the dissents was from Stephen Miran, who voted to cut rates for a fifth consecutive meeting.

The other three dissenters agreed with the no-cut call but disagreed with the inclusion of a “rate cut bias” in the decision statement. Some analysts have speculated that these dissents were meant as a signal to Warsh, Trump’s nominee for Fed chair expected to lead the board starting in May, that they would not necessarily vote to cut rates at the upcoming June meeting.

Warsh faces a difficult position as he prepares to lead the Federal Reserve. While Trump has repeatedly urged the FOMC under Jerome Powell to cut interest rates, Warsh will inherit a divided committee and an uncertain economic situation in the midst of the standoff in Iran, which is expected to continue exerting upward pressure on consumer prices, particularly gas prices.

Adding to the uncertain situation facing the Federal Reserve’s likely incoming chair, current Fed chair Jerome Powell announced on Wednesday that he will stay on the central bank’s Board of Governors for an undefined length of time. Powell was the subject of a criminal investigation by the Department of Justice.

Although the investigation was shelved last Friday, paving the way for GOP Senator Thom Tillis’ support for Warsh’s confirmation, investigators left open the possibility of reviving it in the future. Powell is permitted to continue his service on the Board of Governors until January 31st of 2028.

For now, the FOMC is expected to keep interest rates unchanged in June. CME FedWatch projects a 7.2% probability that the central bank will cut rates, a projection that is up from 5.3% last week and 5.7% one month ago. With Warsh taking over as chair and three dissenters signaling opposition at the April meeting, the uncertainty could be felt across multiple markets.

Several Federal Reserve officials will speak next week. The big headline for economic data will be the April U.S. employment report, which will be released next Friday, May 8th. The median forecast projects a substantial decrease in jobs created, although unemployment is expected to remain unchanged at 4.3%.

Aside from employment data, traders should expect developments in the US-Iran standoff on the Strait of Hormuz to play a major role in how markets position themselves over the weekend.

In a market like this, volatility is always on the table.