Gold rises over 1.5% on US-Iran deal prospects

Gold prices rose by more than 1.5% in European trading on Monday and were on track to record their highest levels in several weeks, supported by a weaker US dollar and falling global oil prices, amid a major breakthrough in peace negotiations between the United States and Iran.

Lower oil prices are easing concerns about accelerating inflation, potentially giving major central banks more room to keep interest rates unchanged in the near term, while expectations for future rate cuts continue to grow.

Price Overview

• Gold prices today:

Gold prices climbed more than 1.5% to $4,580.00 per ounce, from an opening level of $4,509.51. The session low was also recorded at $4,509.51.

• At Friday’s settlement, gold prices lost 0.75%, marking their second consecutive daily decline, pressured by a stronger US dollar and rising global oil prices.

• Gold lost around 0.7% last week, recording a second straight weekly decline due to rising long-term US Treasury yields.

US Dollar

The US Dollar Index fell around 0.4% on Monday, moving further away from a six-week high of 99.52 points and heading toward its first loss in the past three sessions, reflecting broad weakness in the US currency against a basket of major and minor currencies.

As is well known, a weaker dollar makes gold priced in US currency more attractive to holders of other currencies.

Beyond profit-taking activity, the dollar weakened as investor risk appetite improved, amid rising optimism that the United States and Iran are nearing a peace agreement that could end the war in the Middle East.

Global Oil Prices

Oil prices fell by more than 6% at the start of the week, reaching their lowest levels in three weeks, as fears over supply disruptions from the Arabian Gulf eased amid increasing expectations that the Strait of Hormuz could soon reopen to oil tankers.

Latest Developments in the Iran War

• The United States and Iran are reportedly close to reaching a final agreement framework to end the war in the Middle East.

• Trump said that “a large part” of the draft agreement had already been negotiated, though not fully finalized, adding that “time is on Washington’s side” to secure a “good and suitable” deal.

• Sources said the agreement framework includes extending the ceasefire for 60 days, allowing negotiators time to finalize the detailed terms required to permanently end the conflict.

• The agreement also reportedly includes reopening the Strait of Hormuz, ending the US naval blockade on Iranian ports, and allowing Iran to sell oil under specific exemptions.

• Sources added that several contentious issues remain unresolved, including oversight of the Strait of Hormuz, Iran’s complete surrender of highly enriched uranium, and the release of frozen Iranian assets.

• US officials said the agreement would not be signed on Monday and that final approvals could still take several days.

• Tasnim News Agency warned that the draft agreement could collapse due to disagreements over frozen Iranian assets.

US Interest Rates

• Kevin Warsh was officially sworn in as Chair of the Federal Reserve on Friday.

• According to the CME Group’s FedWatch Tool, markets are currently pricing in a 52% probability of a Federal Reserve rate hike in December, compared with just over 16% at the beginning of May.

• Markets are also pricing a 100% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate cut stands at zero.

• Investors are closely monitoring upcoming US economic data and comments from Federal Reserve officials to reassess those expectations.

Gold Outlook

KCM Trade chief market analyst Tim Waterer said Trump’s remarks had increased market hopes for some type of agreement with Iran that could lead to the reopening of the Strait of Hormuz.

He added that this possibility negatively impacted oil prices and, in turn, provided positive support for gold from an inflation perspective.

SPDR Gold Trust

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by around 2.85 metric tons on Friday, bringing total holdings down to 1,034.85 metric tons, the lowest level since May 8.