NEW YORK: Gold prices rose more than 1% on Monday as a pause in U.S.-Iran hostilities pushed oil prices lower and reduced immediate concerns over inflation, while investors awaited the U.S. Federal Reserve’s upcoming policy decision.
Spot gold gained 1.4% to $4,110.56 per ounce by 0200 GMT, while U.S. gold futures increased 1% to $4,112.10 per ounce.
Why Did Gold Prices Rise After the US-Iran Fighting Pause?
Analysts said gold benefited from lower oil prices and a weaker U.S. dollar following signs of de-escalation between Washington and Tehran.
“The clear beneficiary today is gold due to the dual price action in oil and the U.S. dollar, both of which have dropped on de-escalation hopes between the U.S. and Iran,” said Tim Waterer, chief market analyst at KCM Trade.
The U.S. dollar index fell 0.3%, making dollar-priced commodities, including gold, cheaper for holders of other currencies.
Oil prices declined by more than 4% after the United States paused its bombing campaign against Iran and Tehran said it would stop attacks if Washington did the same.
Gold is traditionally viewed as a safe-haven asset during periods of geopolitical uncertainty. However, higher interest rates can reduce demand for gold because the metal does not generate yield.
What Are Investors Watching After the Gold Rally?
Markets are closely monitoring the Federal Reserve’s policy meeting this week, with investors largely expecting interest rates to remain unchanged.
According to the CME FedWatch Tool, traders were pricing in around an 80% probability of a rate hike in September.
Analysts said gold’s near-term direction will depend heavily on oil prices, interest rate expectations and developments in the Middle East.
“Longer term, I remain constructively bullish on gold,” Waterer said, adding that gold prices are likely to remain volatile until a more lasting geopolitical settlement is reached.
Other precious metals also recorded gains on Monday. Spot silver rose 2.8% to $59.81 per ounce, while platinum increased 2.6% to $1,629.15 and palladium gained 2.1% to $1,269.43.