Gold prices rose on Tuesday as an interim agreement between the United States and Iran eased concerns over rising inflation and reduced expectations of further U.S. interest rate hikes, while investors awaited details of the deal and the outcome of the Federal Reserve’s policy meeting.
Spot gold gained 0.8 percent to $4,341.39 per ounce by mid-morning trading, recovering about 8 percent from a near six-month low reached last week. U.S. gold futures also advanced, rising 0.3 percent to US$4,363 per ounce.
Market sentiment improved after U.S. President Donald Trump announced that Washington and Tehran had signed an agreement aimed at ending hostilities in the Persian Gulf. Trump said the text of the accord would be released following a formal signing ceremony scheduled for Friday and added that the strategically important Strait of Hormuz would remain fully open.
The prospect of reduced geopolitical tensions has helped push oil prices lower, easing fears that higher energy costs could fuel inflation and prompt central banks to tighten monetary policy further.
Analysts said investors have responded by scaling back expectations of additional interest rate increases, a development that has supported gold prices.
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“Reports around a peace deal have pushed oil prices lower and the worst inflationary fears seem to be dissipating,” said Ricardo Evangelista, an analyst at ActivTrades. “Investors are also reacting by trimming expectations of interest-rate hikes from central banks, and this is positive for gold.”
Market participants now see a lower likelihood of another U.S. rate increase later this year. According to CME FedWatch data, expectations of a Federal Reserve rate hike in December have fallen to around 56 percent, down from approximately 70 percent before news of the U.S.-Iran agreement emerged.
Gold, which does not pay interest, tends to benefit when expectations for higher interest rates decline because lower borrowing costs reduce the appeal of interest-bearing assets such as bonds.
Attention is now focused on a series of central bank meetings this week, particularly the Federal Reserve’s policy decision on Wednesday. The meeting will be closely watched as it is the first under new Fed Chair Kevin Warsh.
Investors will scrutinize policymakers’ economic projections and comments for any indications that the central bank may adopt a more accommodative stance in response to changing economic conditions.
Analysts believe any signal that the Fed is becoming less aggressive on interest rates could provide additional support for bullion prices.
Meanwhile, long-term demand for gold continues to receive support from central banks. A new survey released by the World Gold Council found that a record 45 percent of reserve managers expect to increase their institutions’ gold holdings over the next 12 months.
The findings underscore gold’s growing role as a strategic reserve asset as central banks seek to diversify away from traditional currencies and strengthen protection against economic uncertainty.
Other precious metals also posted gains. Spot silver rose 0.5 percent to US$70.37 per ounce, although demand indicators from India remained weak. Data showed that India’s silver imports fell to their lowest level in more than three years in May after authorities tightened restrictions on inbound shipments.
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Platinum climbed 1.5 percent to US$1,793.78 per ounce, while palladium added 0.5 percent to reach US$1,354.99 per ounce.
With geopolitical tensions easing and markets awaiting fresh guidance from the Federal Reserve, investors are expected to remain focused on interest-rate expectations and broader economic signals that could influence the outlook for precious metals in the months ahead.
