Trump's Diplomatic Pivot Lifts Gold as Oil Prices Plummet

Gold prices surged on Monday after US President Donald Trump announced that he would pursue diplomatic talks with Iran instead of launching military strikes. Spot gold rose as much as 0.7% to $4,067.06 per ounce, while U.S. gold futures gained 0.9% to $4,065.60.

The increase in gold prices was supported by the softer US dollar, which made dollar-priced bullion cheaper for overseas buyers. The rally followed a sharp decline in oil prices, with Brent crude falling more than 5% after Trump's announcement.

The White House said that Trump had postponed military action to allow diplomatic discussions aimed at reopening the Strait of Hormuz and addressing Iran's nuclear program. OPEC+ also approved an increase in collective production quotas beginning in September, which added pressure on crude prices.

The decline in oil prices reduced expectations of higher energy-driven inflation, making gold more attractive as a defensive asset. However, investors will continue to monitor US inflation data and Federal Reserve policy signals alongside developments in the Iran negotiations to determine the direction for gold.