BY COMFORT OGBONNA
Gold prices rose more than 1% on Monday as investors reacted to a weaker U.S. dollar and declining oil prices amid growing hopes that the United States and Iran could eventually reach a peace agreement to ease tensions in the Middle East.
Spot gold climbed 1.1% to $4,559.29 per ounce by 0359 GMT, while U.S. gold futures for June delivery advanced 0.8% to $4,560.30 per ounce. The gains came as traders reassessed inflation expectations and broader market risks linked to the nearly three-month-long conflict involving Iran, the United States, and Israel.
The precious metal benefited from renewed investor interest after oil prices fell sharply on optimism that diplomatic talks between Washington and Tehran may be moving closer to a breakthrough. Lower oil prices typically ease concerns about accelerating inflation, helping support gold prices under certain market conditions.
Analysts said gold also drew support from a weakening U.S. dollar, which makes bullion more attractive to buyers using other currencies.
“Trump has been raising market hopes for some sort of deal with Iran, which could lead to the reopening of the Strait of Hormuz,” said Tim Waterer, chief market analyst at KCM Trade. “That prospect has weighed on oil prices and, by extension, given gold a welcome lift from an inflation perspective.”
Investor attention remains firmly focused on developments surrounding the Strait of Hormuz, the strategic shipping corridor that previously handled nearly one-fifth of global oil and liquefied natural gas shipments before conflict in the region disrupted trade flows.
Over the weekend, U.S. President Donald Trump said Washington and Tehran had “largely negotiated” a memorandum of understanding tied to a possible peace agreement that could reopen the key waterway. The comments fueled optimism across global markets that supply disruptions in the energy sector may eventually ease.
However, Trump later signaled that negotiations were still far from complete, saying on Sunday that he had instructed U.S. representatives not to rush into any agreement with Iran. The mixed messaging from Washington reflected the fragile nature of the ongoing talks and highlighted the uncertainty still hanging over global markets.
Oil prices fell to two-week lows on Monday as traders responded positively to signs of diplomatic progress, even though both countries remain divided on several critical issues linked to security guarantees and regional tensions.
The relationship between oil prices, inflation expectations, and gold has become increasingly important for investors during the crisis. Rising crude prices tend to increase inflationary pressure by pushing up transportation and production costs across the global economy.
Although gold is traditionally viewed as a hedge against inflation and geopolitical instability, higher inflation can also lead central banks to maintain elevated interest rates for longer periods. Higher rates typically reduce the appeal of non-yielding assets such as gold because investors can earn stronger returns elsewhere.
The market is now trying to balance those competing forces as traders monitor both diplomatic developments and the evolving outlook for global monetary policy.
Attention has also turned toward the leadership of the U.S. Federal Reserve after Kevin Warsh was officially sworn in as chair of the central bank on Friday. Warsh takes office during a period of heightened economic uncertainty as rising fuel prices linked to the Iran conflict continue to weigh on consumer confidence and inflation expectations in the United States.
Recent economic data showed U.S. consumer sentiment falling sharply amid concerns over surging gasoline costs, adding pressure on policymakers who are attempting to balance inflation risks with slowing economic growth.
Beyond gold, other precious metals also recorded strong gains during Monday’s trading session. Spot silver jumped 2.8% to $77.61 per ounce, platinum rose 1.9% to $1,958.35, and palladium gained 2.3% to $1,379.31.
Analysts said the broader rally across precious metals reflected continued investor demand for defensive assets as uncertainty surrounding the Middle East conflict and global economic outlook remains elevated.
Despite the recent optimism surrounding possible peace talks, market participants remain cautious about assuming a quick resolution. Previous negotiations between Washington and Tehran have broken down unexpectedly, and analysts warn that tensions could easily escalate again if talks stall.
For now, investors appear encouraged by the possibility that diplomatic progress could eventually stabilize global energy markets and reduce inflation pressures, even as uncertainty continues to dominate the broader financial landscape.
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