Gold Rises as US-Iran Tensions Ease and Central Banks Continue to Buy

Gold prices rose by roughly one percent on Monday to near the $4,100 threshold after hitting a nine-month low just days earlier. The increase was fueled by an unexpected de-escalation in the US-Iran conflict and a subsequent decline in oil prices. This shift in geopolitics reduced inflation concerns, which had weighed heavily on gold prices.

The weekend saw a significant decrease in tensions between Washington and Tehran, with both sides halting their military actions and Omani mediation efforts underway to address the Strait of Hormuz issue. Oil prices dropped by more than five percent in some contracts, while gold gained as the geopolitical risk premium began to unwind.

Central banks remain key buyers of gold, with official holdings crossing 36,600 tonnes for the first time in July. The United States retains the largest official gold reserves globally at 8,133 tonnes, followed by China's central bank, which acquired roughly 9.95 tonnes in May as part of its multi-year accumulation strategy.

The Federal Reserve's interest rate decision on Wednesday is expected to have a significant impact on gold prices. While some market participants believe the Fed may hike rates this week, others see only a 30 percent probability of a rate hike and expect a dovish tone from the central bank.