Gold Rises as Tensions Ease, Oil Prices Fall

The value of gold increased by over 1% on Monday as tensions in the Middle East eased, leading to lower oil prices and concerns about inflation subsiding. Spot gold rose to $4,110.56 per ounce by 0200 GMT, while US gold futures gained 1% to $4,112.10.

The decline in oil prices was due to a halt in hostilities between the US and Iran, with the Iranian official stating that their attacks would cease as long as the US did the same. This reduction in tensions led to a decrease of more than 4% in oil prices for the day.

Despite gold traditionally being seen as an inflation hedge, its value has been affected by higher interest rates raising the opportunity cost of holding non-yielding metals. However, Tim Waterer, chief market analyst at KCM Trade, remains constructively bullish on gold, stating that its fate is closely tied to oil prices and geopolitical headlines.

The Federal Reserve's policy decision this week will also be a key factor in determining the future of gold prices, with investors widely expecting rates to remain unchanged. However, traders are pricing in an 80% chance of a hike in September, according to the CME FedWatch Tool.