Gold may gain as oil prices fall on possibility of Iran deal; however, upside may remain capped. (AI image)Gold price prediction today: Gold prices may gain if oil prices fall, but the rise is likely to be capped, says Praveen Singh, Head Currencies and Commodities, Mirae Asset ShareKhan.Gold Price Performance:On May 21, spot gold, buoyed by Iran deal hopes, traded with a positive bias. At the time of writing, the metal was trading with a daily gain of 1.35% at $4570 as crude oil slumped, which eased rate hike concerns to an extent. Earlier, in the week ending May 22, spot gold traded in a narrow range of $4453 (May 20)- $4589 (May 19) and closed with a daily loss of 0.75% at $4510 on Friday; the shiny metal was down 0.65% for the week as the Fed rate hike odds rose due to inflation fears.Geopolitics and oil:Over the weekend, Iran and the US negotiators tried to agree to a memorandum of understanding (MoU), which could lead to opening of the Strait of Hormuz and a ceasefire of 60 days that could provide the two sides more time to resolve their differences over key issues like uranium enrichment, Israel’s war in Lebanon, and release of Iranian oil revenues frozen in foreign banks. Both the sides, facing pressure to end the conflict, have noted progress in the negotiations but remain divided on certain issues like the control of the Strait of Hormuz, US blockade, Israel’s ambitions and release of Iran’s frozen funds.Esmail Baghaei, the spokesperson for Iran’s negotiating team, said future management of the Strait of Hormuz was a matter for Oman and Iran to reach an agreement on. He denied that Iran wants a toll system as he talked about “fees for navigational services”. He also insisted that a ceasefire in Lebanon had to be included in the memorandum of understanding that would lead to Iran allowing commercial shipping through the strait, and the US lifting its blockade of Iran’s ports. He ruled out tackling nuclear issues in the MoU, which would rather be discussed in the sixty-day ceasefire period. Iran's demand also includes releasing as much as $12bn (£9bb) in frozen Iranian assets held in Qatar. It is to be noted that Trump has been critical of Barack Obama for giving $1.7bn to Iran in cash at the time of the 2015 nuclear deal. The MoU does not contain anything on Iran’s ballistic missiles or support for its regional proxies.Under the potential MoU, Tehran would agree to give up that stockpile of highly enriched uranium; however, how Iran would give it up would be subject to further talks over the 60-day period. At the same time, Iran maintains it has an inalienable right to nuclear technology while insisting its program is peaceful.US President Donald Trump on Monday urged Muslim-majority nations across the Middle East and beyond to normalize relations with Israel as part of the emerging Iran peace deal.At the time of writing, Brent oil futures at $93.87 were down by 6.38%.Data roundup:The US data released on May 22 were bearish for commodities: University of Michigan consumer sentiment fell 5 points from 49.80 in April to 44.80 in May -- lowest on record-- on rising inflation. Consumers expect prices to rise an annualized 3.9% over the next five to 10 years, up from 3.5% in April and the highest in seven months. One-year inflation expectations rose from 4.5% to 4.8% y-o-y.ETF and COMEX inventory:As of May 22, total known global gold ETF holdings stood at 98.65 MO, down 0.30 MOz YTD. Holdings fell 0.14 MOz in the week ending May 22.Registered COMEX gold inventory slid 0.03 MOz to 15.67 MOz last week.CFTC position:Money managers decreased their bullish gold bets by 6,239 net-long positions to 94,388 in the week ending May 19, according to the CFTC data. The net-long position was the least bullish in three weeks as long-only positions fell 5,012 lots to 124,058, while short-only positions rose 1,227 lots to 29,670 -- the highest in three weeks.US Dollar Index and yields:At the time of writing, the US Dollar Index at 99.01 was down by 0.25% as the Index eased from a nine-week high on sharp decline in oil prices and pick up in risk sentiments.As the US markets were closed on May 25 to observe Memorial Day Holiday, bonds did not trade.Earlier In the week ending May 22, two-year US yields rose 1.5% to 4.12%, while ten-year yields were down by 2 bps for the week.Federal Reserve Governor signals hawkish stance:The Fed Governor Waller said on May 22 that although he prefers that the Federal Reserve should hold rates unless more clarity emerges on impacts of the Iran war, he warned that the next Fed move could be a rate hike unless inflation starts coming down soon.As of May 22, investors were pricing in a full quarter point rate hike by December for the first time.USDINR falls:The USDINR pair has come under pressure on easing geopolitical tensions leading to a sharp decline in oil prices and RBI’s assessment that the INR, after a sharp decline since the beginning of the Iran war, has become undervalued. The pair has fallen nearly 1.8% from its record high of Rs 96.96.Upcoming data:Major US data on tap this week include May ADP weekly employment change (May 26), May Conference Board Consumer Confidence (May 26), April real personal spending, April PCE Price Index (April) and 1Q final GDP reading (May 28). Gold Price Outlook:Although the US and Iran have reduced their differences, uncertainty continues to linger. US officials are worried Iran will drag its feet on nuclear issues after securing some relief under the MoU. Similarly, Israel is also concerned the US could do a deal that would hurt the former’s interests. Iran is concerned over the possibility that the US may not honour its commitments to a potential deal.US yields may soften further if US and Iran reach an agreement on MoU, which could boost gold prices.The US President Trump has given a freehand to the Fed Chair Warsh to run the monetary policy. The Fed Chair, despite his views that AI productivity can facilitate rate cuts, will face hurdles in building a consensus for a cut as inflation remains elevated.Long-term yields are rising on inflation risk premium, inflation expectations, massive AI Capex spending (economic growth momentum), fiscal overhang and rise in term premium. So, yields may not fall much even when the conflict ends.In this scenario, gold may gain as oil prices fall on possibility of Iran deal; however, upside may remain capped.Nonetheless, spot gold can trade with a positive bias in the very short run. Support is at $4500/$4450. Resistance is at $4610/$4670.Note: Currency exchange risk is material. (Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.)