Gold Surges 2% as US-Iran Ceasefire Eases Inflation Fears

Gold prices climbed more than 1% to around $4,180 an ounce on Friday, reaching a one-week high as investors weighed a softer US dollar and retreating oil prices against the prospect of further Federal Reserve rate hikes. Oil prices pulled back following a recent rally after US President Donald Trump said Washington would not attack Iran before next month’s US midterm elections, as diplomatic efforts to end the war continued. The conflict has disrupted global energy markets, fueling concerns over inflation. Meanwhile, St. Louis Fed President Alberto Musalem said on Thursday that further monetary tightening may be needed to bring inflation back to the central bank’s 2% target, although he declined to signal how he would vote at the Fed’s policy meeting later this month. According to the CME FedWatch Tool, traders were pricing in less than a 20% chance of a rate hike in October, but more than an 80% probability of at least one 25-basis-point increase by December.

Gold rose toward $4,200 an ounce on Friday, gaining for a second consecutive session as falling oil prices and bond yields eased pressure on non-yielding metals. Oil prices declined after President Donald Trump said the US was engaged in “productive discussions” with Iran and would refrain from attacking the country before the midterm elections. His remarks came even as Iran intensified attacks on tankers transiting the Strait of Hormuz this week, while a hurricane disrupted offshore oil production in the Gulf of Mexico. Meanwhile, US Treasury yields retreated from 24-year highs following strong demand at a 30-year bond auction, indicating that investors remained willing to buy long-dated government debt despite the recent selloff. On the monetary policy front, markets are pricing in roughly an 82% chance that the Federal Reserve will keep interest rates unchanged this month, while the probability of a rate hike in December stands at around 81%.

Gold steadied near $4,150 an ounce on Friday and was on track to finish the week little changed, as investors assessed developments in the Middle East and the outlook for Federal Reserve monetary policy. Oil prices eased after President Donald Trump said the US was engaged in “productive discussions” with Iran and would refrain from attacking the country before the midterm elections. His comments came even as Iran intensified attacks on tankers passing through the Strait of Hormuz this week. A hurricane also disrupted US offshore oil production in the Gulf of Mexico. Meanwhile, markets are currently pricing in an approximately 82% probability that the Fed will keep interest rates unchanged this month, while the odds of a rate hike in December stand at around 81%. On Thursday, St. Louis Fed President Alberto Musalem indicated that rates may need to rise over the next six to nine months to bring inflation back toward the central bank’s 2% target.