Hormuz Deal Sparks Gold Price Surge

Gold prices surged by over 3% to around $4,230 an ounce as markets responded positively to reports of an interim deal to reopen the Strait of Hormuz. The news eased concerns about inflation and reduced the likelihood of a Federal Reserve interest rate hike.

The prospect of an agreement allowing for the reopening of the critical waterway has led to a decrease in oil prices, with US oil extending losses. As a result, the dollar pushed lower. Fed officials had previously kept policy unchanged for the fifth straight time when they met last week, although three dissenters favored a hike.

With markets now fully pricing in a single US rate increase by year-end, gold has seen a significant gain, up from its decline of about 20% since the US-Iran war began in late February. The conflict had sent energy prices soaring, stoked inflationary pressures, and raised the likelihood that rates would stay higher for longer.

Support for bullion has also emerged from Chinese institutional investors, who have helped to arrest the decline and keep prices above the key $4,000-an-ounce threshold. Gold-backed exchange-traded funds in China saw 14 straight days of inflows up to Monday, the longest streak since March.