U.S.-Iran Ceasefire Triggers Oil Price Decline, Gold Rally

The sudden halt in U.S.-Iran military actions has led to a decline in oil prices and a rally in gold. On Monday, July 27, international oil prices plummeted over 6% after the Trump administration decided to create room for diplomatic negotiations with Iran. Meanwhile, spot gold rose by more than $40 to reach a peak of $4,096.63 per ounce, currently trading around $4,085 per ounce.

The easing of risk-off sentiment supported gold's rebound, but the probability of a Fed rate hike this year remains high at 92%. Analysts believe that gold's short-term upside is constrained due to skepticism over Iran's sincerity regarding the ceasefire and the potential for a Federal Reserve meeting next week. However, in the long term, gold remains a safe-haven asset.

U.S.-Iran diplomatic hopes have been rekindled after President Trump decided to create room for negotiations with Iran, followed by a simultaneous pause in retaliatory actions from the Iranian military. This has alleviated market concerns over supply terminals in the Strait of Hormuz and reduced inflationary worries. As a result, oil prices declined, easing pressure on the Federal Reserve to raise interest rates.