Gold Prices Jump Over 2% as U.S.-Iran Peace Deal Weakens Dollar
Gold prices climbed more than 2% during Asian trading on Monday after the United States and Iran announced an interim peace agreement.
The deal raised hopes that the Middle East conflict could end. It also sent oil prices sharply lower, reduced inflation concerns and weakened expectations for further interest-rate increases.
Spot gold gained 2.3% to trade at $4,317.32 per ounce by 21:48 ET, or 01:48 GMT.
Meanwhile, U.S. gold futures for August delivery rose 2.4% to $4,338.75 per ounce.
Gold Extends Recovery From Recent Lows
Monday’s gains extended gold’s recovery from the multi-month lows recorded last week.
The precious metal had fallen close to $4,000 per ounce as rising oil prices, a stronger dollar and higher Treasury yields weighed on demand.
Gold does not generate interest. Therefore, higher bond yields can make the metal less attractive compared with income-producing assets.
U.S. and Iran Reach Interim Peace Framework
Officials from the United States and Iran said on Sunday that both sides had agreed on a framework designed to end the conflict.
The proposed agreement includes an immediate halt to hostilities and an end to the U.S. blockade of Iran.
It also calls for the reopening of the Strait of Hormuz, one of the world’s most important routes for oil shipments.
Pakistani Prime Minister Shehbaz Sharif said the agreement is expected to be formally signed in Switzerland on Friday.
Oil Prices Tumble as Supply Fears Ease
The peace announcement triggered a sharp decline in global oil prices.
Brent crude fell more than 4% to around $84 per barrel as traders anticipated the return of Gulf oil supplies.
The agreement also reduced fears that the conflict could disrupt shipments through the Strait of Hormuz.
Lower oil prices may ease inflationary pressure by reducing transportation, manufacturing and energy costs.
Weaker Dollar Supports Gold Prices
The U.S. dollar also declined against a basket of major currencies following the announcement.
The U.S. Dollar Index fell around 0.2%.
A weaker dollar usually makes gold less expensive for buyers using other currencies. This can increase international demand for the precious metal.
Iran Conflict Had Pressured Gold
Gold struggled during much of the conflict despite its traditional role as a safe-haven asset.
The war pushed oil prices sharply higher, raising concerns that energy costs would fuel another wave of inflation.
Investors responded by expecting interest rates to remain elevated for longer. Those expectations supported both the dollar and U.S. Treasury yields.
As a result, the higher opportunity cost of holding non-yielding gold limited the metal’s safe-haven appeal.
Fed Rate-Hike Expectations Decline
Expectations for additional U.S. monetary tightening eased after the peace framework was announced.
Traders now see a 49% probability that the Federal Reserve will raise interest rates by December. That is down from 69% one week earlier, according to the CME FedWatch Tool.
Investors will now focus on the Federal Reserve’s June 16-17 policy meeting.
The central bank is widely expected to leave interest rates unchanged. However, markets will closely examine its updated economic forecasts and policy guidance.
Global Central Banks Remain in Focus
Other major central banks will also announce policy decisions this week.
The Bank of Japan is expected to raise its benchmark interest rate to 1%.
Meanwhile, the Bank of England is widely forecast to keep its current policy unchanged.
These decisions could influence the dollar, global bond yields and the outlook for precious metals.
Silver and Platinum Record Strong Gains
Other precious metals also advanced during Monday’s trading session.
Silver prices jumped 3.3% to $70.24 per ounce.
Platinum gained 3.2% to reach $1,776.60 per ounce.
The broader rally reflected the weaker dollar, lower interest-rate expectations and improving demand across the precious-metals market.
