Gold Rises on US-Iran Tension Easing, Oil Prices Plummet
Gold prices rose on Monday as tensions between the US and Iran eased, causing oil prices to drop sharply and alleviating some inflation concerns. The precious metal's value increased by 0.9% to $4,087.79 per ounce, with U.S. gold futures also gaining 0.5% to $4,089.90.
According to Tim Waterer, chief market analyst at KCM Trade, 'Gold is a clear beneficiary today of the dual price action in oil and the US dollar.'
The US dollar index fell by 0.3%, making gold more affordable for investors holding other currencies.
Oil prices plummeted over 4% on Monday, reversing some of the gains made since the conflict began earlier this year, which had driven inflation concerns and expectations of central bank rate hikes.
Despite being traditionally seen as an inflation hedge, gold becomes less attractive when interest rates rise, increasing the opportunity cost of holding non-yielding metals like gold.
Waterer remains constructively bullish on gold in the long term but notes that its immediate fate is tied to oil prices and geopolitical headlines until a more durable peace takes hold.