Gold prices climbed 2% on Monday after the United States and Iran agreed on a preliminary framework to end their conflict, easing geopolitical tensions and triggering a broad market reaction across commodities and currencies.
Spot gold rose to $4,304.11 per ounce as of early trading, its highest level since June 9, while US gold futures for August delivery gained 2% to $4,325.20.
The rally came as oil prices fell more than 4% and the US dollar weakened to a 10-day low following news of the peace agreement, which includes plans to reopen the Strait of Hormuz and end the US blockade of Iranian ports.
Market analysts said the decline in oil prices is helping to ease inflation expectations, reducing pressure on central banks to maintain aggressive interest rate policies. This shift has improved sentiment towards non-yielding assets such as gold.
According to market commentary, expectations for a US interest rate hike in December have dropped significantly, with traders reassessing the likelihood of tighter monetary policy in the months ahead.
While gold is traditionally viewed as an inflation hedge, its appeal typically weakens in higher interest rate environments due to the opportunity cost of holding the metal.
Other precious metals also advanced in tandem with gold, with silver, platinum and palladium all posting gains of more than 3% as investors reacted to improved risk sentiment across global markets.
