Gold rose on Monday, as a pause in hostilities between the United States and Iran sent crude oil prices to a one-week low, easing inflation concerns ahead of the U.S. interest rate decision this week.
Spot gold gained 0.9% to $4,087.59 per ounce by 09:43 a.m. EDT (1343 GMT), while U.S. gold futures for August delivery rose 0.5% to $4,090.
“Primarily what we’re seeing is the oil market is down from over $100 last week to $90, and it’s driving the interest rate outlook lower,” said Bart Melek, global head of commodity strategy at TD Securities.
Oil prices fell 6% to hit a one-week low, after the U.S. and Iran paused strikes over the weekend following two weeks of attacks, raising hopes of a diplomatic solution that would de-escalate the conflict and allow shipping to resume in the Strait of Hormuz.
Lower energy prices ease inflation concerns and reduce bets for higher-for-longer interest rates. While gold is seen as a hedge against inflation, higher rates typically weigh on the non-yielding metal.
Investors now await the U.S. Federal Reserve’s interest rate decision on Wednesday, with 66% of traders expecting policymakers to hold interest rates steady, CME FedWatch data showed.
However, they are pricing in about a 79% chance of a U.S. rate hike in September. FEDWATCH
Investors also await the U.S. Personal Consumption Expenditures data for June, the Fed’s preferred inflation gauge, due on Thursday, for further cues on monetary policy.
Meanwhile, China’s net gold imports via Hong Kong more than doubled year-on-year in June, but slipped over 5% from the previous month, data from Hong Kong’s Census and Statistics Department showed on Monday.
Among other metals, spot silver rose 1.3% to $58.92 per ounce, platinum gained 2.3% to $1,625.31, and palladium climbed 3.4% to $1,285.79.