Gold Soars as Hopes of US-Iran Peace Deal Reduce Inflation Fears

Gold prices surged over 2% on Wednesday to reach their highest level in a month as hopes of a US-Iran peace deal reduced inflation concerns.

Hopes of an imminent end to the five-month conflict between the two countries, following all-day negotiations on Tuesday, fueled expectations of a Gulf ceasefire deal.

As a result, Treasury yields fell to a one-week low, making non-yielding assets like gold more attractive. The US dollar also remained under pressure, making greenback-priced metals more appealing to holders of other currencies.

According to the CME FedWatch Tool, traders are now pricing in a 59% probability of a September rate hike, down from 67% the previous day. Federal Reserve Bank of Kansas City President Jeff Schmid stated that some sort of monetary policy tightening is needed to get 'too high' inflation back to the 2% target.

However, Hamad Hussain, a climate and commodities economist at Capital Economics, predicted that gold prices would fall below $4,000 per ounce by the end of this year as concerns about the Fed's credibility ease with interest rate hikes.