Gold Surges Over 3% as Fed Rate Cut Hopes Grow and Hormuz Deal Optimism Lifts Investor Demand

Gold prices surged over 3% to around $4,230 an ounce on Tuesday as investors poured money into the precious metal. The rally was driven by growing optimism that a deal could reopen the Strait of Hormuz, easing concerns about global energy supplies and strengthening expectations that the US Federal Reserve may not need to keep interest rates higher for longer.

The weaker US dollar and sharp decline in oil prices also contributed to the gold price gains. A decline in the US currency makes the metal more affordable for buyers in other countries, typically leading to stronger international demand and pushing prices higher. Falling oil prices have also eased worries about inflation, giving the Federal Reserve more room to avoid additional rate increases.

Investors are now pricing in only one interest rate increase before the end of the year, down from two previously expected hikes. This shift in market expectations makes gold a more attractive investment option compared with assets like government bonds that offer fixed returns.