Gold Prices Soar 4% on Hopes for US-Iran Agreement

Gold prices surged nearly 4% yesterday, reaching their highest level since mid-June as hopes for an interim US-Iran agreement eased concerns over inflation and interest rates.

The rally follows reports that the US may be close to reaching a deal with Iran to reopen the Strait of Hormuz, sending oil prices lower and weakening the US dollar.

Since the conflict in the Middle East escalated in late February, gold had fallen by more than 20% as markets priced in a greater likelihood of interest rate hikes. However, despite this recent rally, analysts remain constructive on gold's longer-term outlook, supported by strong investment demand and continued buying from central banks.

Citi analysts expect gold to trade sideways in the near term before rebounding to around US$4,500 an ounce in the fourth quarter.