Gold Prices Surge After U.S.-Iran Peace Deal Eases Oil Inflation Fears

TLDR

• A preliminary peace deal between the U.S. and Iran sent oil prices sharply lower, falling from above $110 to around $80 a barrel.
• Gold jumped nearly 3%, reaching $4,338 per ounce, its highest level since June 9.
• The deal will reopen the Strait of Hormuz, a key oil shipping route blocked since the war began in late February.
• A weaker U.S. dollar added to gold’s gains, as the greenback had been a safe-haven during the conflict.
• The chance of a Fed rate hike by December dropped from 69% to 49%, as lower oil prices ease inflation pressure.

Gold surged on Monday as news of a U.S.-Iran peace deal pushed oil prices lower and reduced fears of further interest rate hikes. The move sent bullion to its highest point in nearly a week.

Oil Drops as Strait of Hormuz Set to Reopen

Spot gold climbed 2.8% to $4,338.14 an ounce, while gold futures rose by the same amount to $4,359.09. The gains came after word that the U.S. and Iran had reached a preliminary agreement to end hostilities.

The deal, mediated in part by Pakistan, is expected to be signed in Switzerland on Friday. Iran has said it will not take effect until then.

President Donald Trump confirmed the agreement will unblock the Strait of Hormuz. The waterway is a critical route for global oil supplies, carrying roughly one fifth of the world’s oil before the war began in late February.

Brent crude futures, which had topped $110 a barrel during the conflict, fell back to just above $80 a barrel following the news.

Dollar Weakens, Boosting Gold’s Appeal

Gold’s rise was also supported by a drop in the U.S. dollar. The greenback fell to a 10-day low against major currencies.

During the war, the dollar had strengthened as a safe-haven asset. With the peace deal reducing uncertainty, risk appetite improved and the dollar gave back some of those gains.

A weaker dollar tends to support gold prices by making the metal cheaper for buyers using other currencies.

Analysts at Britannia Global Markets said the deal “softened the dollar and pulled crude sharply lower, creating a friendlier macro backdrop for risk assets across the commodity spectrum.”

The drop in oil prices also eased fears that central banks would be forced to raise interest rates to fight energy-driven inflation. Gold typically performs better in lower rate environments, since it pays no yield.

Traders are now pricing in a 49% chance of a Fed rate hike by December, down from 69% just one week ago, according to CME FedWatch data.

The Federal Reserve is expected to hold rates steady at the conclusion of its two-day policy meeting on Wednesday. It will be Chairman Kevin Warsh’s first Federal Open Market Committee meeting.

XTB analyst Kathleen Brooks said the peace deal “puts downward pressure on the oil price and thus reduces inflation concerns,” adding that the timing matters given the major central bank meetings scheduled this week.

Neither the U.S. nor Iran has released specific details of the agreement beyond what has been shared through Pakistan and Trump’s public comments.

The deal has not yet been formally signed, and Iran has stated it will not be implemented until the signing ceremony in Switzerland on Friday.

The post Gold Prices Surge After U.S.-Iran Peace Deal Eases Oil Inflation Fears appeared first on CoinCentral.