Gold retreats as Donald Trump announces easing Middle East tensions

On Tuesday, gold prices dropped to a near two-week low, Reuters reports. Investor risk appetite rose following US President Donald Trump's announcements of easing tensions between Israel and Iran, which dimmed safe-haven demand.

Market participants are likely to stop pricing in geopolitical risks once there are signs of de-escalation between the United States and Iran, says Ilya Spivak, head of global macroeconomics at Tastylive.

Meanwhile, Michelle Bowman, US Federal Reserve (Fed) Vice Chair for Supervision, claimed a weakening labor market may trigger monetary easing in the near future. Gold prices tend to rise as interest rates are cut, Reuters notes.

Investors are currently awaiting Fed Chair Jerome Powell’s speech before the US House Financial Services Committee. Ilya Spivak expects gold to correct and the dollar to strengthen in the short term if market participants are convinced the American regulator will proceed with no more than two cuts this year.