Oil Selloff Boosts Gold to $4,110 as US-Iran Tensions Ease

Oil prices plummeted by about 5% on Monday after Washington paused its bombing campaign against Iran and Tehran agreed to hold back attacks, creating a relief rally in gold. The precious metal climbed above $4,100 an ounce as the dollar index slipped 0.3%, making bullion cheaper for buyers using other currencies.

The sharp reversal in crude matters for gold because it reduces the risk of another near-term inflation shock. Energy costs had strengthened expectations that the Federal Reserve may need to raise interest rates again, increasing the opportunity cost of holding a non-yielding asset.

Analysts said Monday's combination of cheaper oil and a softer dollar created a more supportive backdrop for bullion. The move also showed that gold is currently trading as much on the inflation and rates outlook as on demand for protection from geopolitical risk.