Gold prices rose sharply on Monday as a temporary pause in hostilities between the United States and Iran pushed oil prices and the U.S. dollar lower. The move eased some inflation concerns and strengthened demand for precious metals.

Gold Climbs Above $4,110 per Ounce

As of 02:00 GMT, spot gold rose 1.4% to $4,110.56 per ounce, while U.S. gold futures gained 1% to $4,112.10 per ounce.

The U.S. Dollar Index fell 0.3%, making dollar-denominated metals more affordable for buyers using other currencies.

Falling Oil Prices Ease Inflation Concerns

Iran said it would halt its attacks as long as the United States did the same. Combined with the U.S. decision to pause its bombing campaign, the development pushed oil prices down by more than 4% during the session.

Lower oil prices helped reduce inflation expectations and concerns that central banks may need to continue raising interest rates. This is supportive for gold because higher interest rates increase the opportunity cost of holding the non-yielding metal.

Markets Await the Fed’s Decision

Attention is now turning to the Federal Reserve’s policy meeting this week. Most investors and economists expect the central bank to leave interest rates unchanged.

According to the CME FedWatch Tool, markets are pricing in an approximately 80% probability of a rate increase in September.

Precious Metals Rise Across the Board

Spot silver advanced 2.8% to $59.81 per ounce. Platinum climbed 2.6% to $1,629.15, while palladium gained 2.1% to $1,269.43.

Conclusion

Gold is benefiting from lower oil prices, a weaker U.S. dollar and hopes that geopolitical tensions will continue to ease.

However, short-term price movements may remain volatile as investors monitor developments in the Middle East and the Federal Reserve’s policy decision.

Source: Reuters