Gold Prices Rise as US-Iran Ceasefire Eases Inflation Fears

Gold prices rose by 1.09 percent over the past seven trading sessions to reach $4,055.70 per troy ounce on Monday as a US-Iran ceasefire eased inflation fears and reduced pressure on the precious metal.

The unexpected truce came late Friday when the US suspended its bombing campaign against Iran without formal announcement, while Tehran halted retaliatory strikes and initiated talks with Oman over the Strait of Hormuz. The détente triggered an immediate sell-off in crude oil prices, which tumbled more than five percent at one point, and weakened the dollar index.

The relief rally marks a sharp reversal from recent trends as gold had been under pressure from conflict-driven supply disruptions spanning the Strait of Hormuz to the Red Sea, pushing oil prices higher and stoking inflation fears that undermined the appeal of the non-yielding asset.

Central bank demand has provided structural support for the gold market, with China's central bank purchasing approximately 9.95 tonnes of gold in May as part of a multi-year accumulation campaign aimed at diversifying foreign exchange reserves. Gold now accounts for roughly 27 percent of global official reserve assets, according to reports.