Gold Rises as US-Iran Tensions Ease, Oil Prices Plummet
Gold prices rose by 1% to $4,093.34 per ounce on Monday as tensions between the US and Iran eased, causing oil prices to drop over 5%. The decrease in energy prices has reduced inflation concerns and expectations of higher interest rates. Gold is often seen as a hedge against inflation, but its non-yielding characteristic makes it less appealing when interest rates are high.
Ross Norman, an independent analyst, stated that precious metals started the week on the front foot due to the pause in Middle East hostilities. Oil prices plummeted as investors became more optimistic about a diplomatic solution to de-escalate the conflict surrounding the Strait of Hormuz.
The US dollar index dropped 0.2%, making gold more affordable for buyers overseas. The easing of inflation concerns has led market participants to anticipate an interest rate hike, with around 34% expecting a rate increase. Traders are pricing in about a 79% chance of an interest rate hike in September.