Gold, Silver Rally with Bonds and Stocks on Rumours of US-Iran Progress

GOLD and SILVER PRICES rallied from multi-week lows on Monday as crude oil fell back from a fresh spike amid new hopes for a US-Iran deal to re-open the Strait of Hormuz to oil-tanker traffic, while Group of Seven finance chiefs met to discuss the sell-off in government bonds that has sent yields and borrowing costs to their highest levels in decades, writes Atsuko Whitehouse at BullionVault.

Falling overnight to a 7-week low of $4481 per troy ounce, spot gold prices then rose to trade 1.2% above last Friday's finish in London after recording gold's worst-ever weekly drop outside of mid-March's $482 plunge.

Western stock markets also reversed early losses, and silver rebounded above $78 per ounce from an 8-session low beneath $74, after Tehran media said the USA has offered to pause sanctions on Iranian oil exports during the peace talks currently being mediated by Pakistan.

Government bond prices also rebounded Monday alongside gold, silver and equities, pulling longer-term borrowing costs back from fresh multi-decade highs for the UK, Germany and Japan.

G7 finance chiefs meeting in Paris this week are expected to discuss the global selloff that has pushed bond-market interest rates up to 5% per annum on US 30-year Treasury debt, 4% on Japan's 30-year JGB − the highest since its 1999 debut − and close to 6% on comparable UK Gilts amid mounting inflation, fiscal and debt-sustainability concerns.

"The increase in the US Treasury security supply is compressing the safety premium that US Treasuries have traditionally commanded − an erosion that pushes up borrowing costs globally," international lender the IMF said in its April report.

"The credit markets are headed for some kind of bond crisis," warned Jamie Dimon, CEO of US banking giant J.P.Morgan, earlier this month.

The US Treasury Department expects to borrow $189 billion in the April-June quarter, $79 billion more than projected in February.

Washington is now spending more than $1 trillion annually on debt interest alone, while federal deficits continue to run near $2 trillion per year, according to Congressional Budget Office projections.

"Gold's bullish backdrop remains supported by geopolitical risks, mounting fiscal deficits and ongoing monetary-policy uncertainty," says bullion bank HSBC's analyst James Steel, cautioning that the metal could face near-term volatility and liquidation pressure as investors raise cash during broader market stress following the Iran conflict.

"Gold acted like an insurance policy [in March] and investors cashed in part of that policy when they needed liquidity."

With Iran's semi-official Fars news agency claiming that Tehran has launched Bitcoin-backed insurance for shipping to pass through Hormuz, the US and Iran "don't have much time" to find agreement over Tehran's nuclear programme, Reuters quotes a Pakistani official after conveying Iran's latest proposal to Washington.

"They better get moving, FAST, or there won't be anything left of them," said US President Donald Trump of Iran after speaking Sunday with Israel's Prime Minister Benjamin Netanyahu.