Gold surged more than 1% during Asian trading on Monday, climbing to $4,106.65 per ounce. This upward movement followed a temporary pause in US-Iran hostilities, which triggered a sharp decline in oil prices and eased inflation concerns linked to high energy costs.
Calm Between US and Iran Shifts Market Sentiment
Advisers reportedly cautioned former President Trump that the military options against Iran were running thin, with worries about depleting U.S. munitions stocks contributing to the halt in strikes. According to a senior Iranian official speaking to Reuters, Iran agreed to suspend its attacks as long as the US maintained its pause, sparking hopes for a diplomatic breakthrough.
Oil prices took a steep tumble, falling up to 7% amid optimism for easing tensions. This reversed earlier predictions suggesting Brent crude could approach $120 per barrel, a level last seen during peak war-time rates, especially after Brent surpassed $100 over the weekend. Lower oil prices tend to reduce inflationary pressures, which in turn diminishes the Federal Reserve’s motivation to keep interest rates elevated for an extended period. Since gold does not yield interest, its appeal often weakens under persistently high rates.
However, traders still assign an 80% probability to a rate increase in September, according to the CME Group’s FedWatch Tool, reflecting ongoing uncertainty in monetary policy.
Other precious metals mirrored gold’s gains: silver jumped 2.7% to $59.74 per ounce, extending its recent breakout above resistance levels; platinum advanced 2% to $1,619.75; and palladium rose 2.3%, reaching $1,271.93. Speculators on COMEX increased their gold net long positions by 4,438 contracts in the week ending July 21, bringing total open interest to 123,586 contracts, based on CFTC data.
The Federal Reserve’s rate decision later this week will be key in determining whether the current truce can sustain the metal rally. Economists remain divided, with a survey of 104 experts showing no consensus on the Fed’s next move. Should hostilities resume and oil prices spike again, precious metals could face renewed volatility.
