Gold Slightly Up as US-Iran Truce Hopes Ease Inflation Fears

Gold rose to above $4,530 per ounce on Wednesday, halting the drop that bottomed at a two-month low of $4,490 last session, and tracking the respite for Treasuries as signs of incoming energy supply from the Middle East tamed expectations of higher inflation. President Trump stated the US was close to an agreement to end the conflict with Iran, while three supertankers exited the Persian Gulf with cargoes to Asia. The developments supported the possibility that inflation could rise less than feared, dimming the risks of a hawkish Federal Reserve. Evidence of high inflation had led multiple policymakers to dissent against the easing bias in the Fed's last rate hold. On top of that, fresh minutes from the meeting indicated that a majority of members noted it may be appropriate to raise interest rates this year if inflation remains above the 2% threshold. Markets are split on whether the central bank may deliver a rate hike by December or whether rates will stay put.

Gold inched up to $4,530 an ounce on Wednesday, recovering from its lowest level since March 30, as hopes of a potential US-Iran conflict resolution eased some inflation concerns. President Donald Trump stated the war with Iran would end "very quickly," while Vice President JD Vance highlighted progress in talks with Tehran to cease hostilities. However, the prolonged conflict has kept the Strait of Hormuz effectively closed, maintaining oil prices above $100 a barrel and sustaining inflationary pressures. Accelerating US inflation has led traders to further scale back expectations for Federal Reserve rate cuts this year, while reinforcing bets that the central bank could still hike rates before year-end. Markets now price in a 40% chance of a December rate hike, with rate cut expectations pushed into 2027 on hopes the current inflation surge is temporary. Investors will also parse the minutes from the Fed’s April policy meeting for further clues.

Gold traded below $4,500 an ounce on Wednesday after tumbling nearly 2% in the previous session, as escalating tensions between the US and Iran kept investors focused on inflation risks and the prospect of higher interest rates. President Donald Trump warned that the US could resume strikes on Iran within “two or three days” if Tehran failed to agree to Washington’s peace terms. The remarks came shortly after Trump said he had called off a planned attack following appeals from Gulf allies, with Tehran’s nuclear program being a major sticking point in negotiations. The prolonged conflict has effectively kept the crucial Strait of Hormuz closed to shipping, driving oil prices higher and intensifying inflationary pressures. Accelerating US inflation has also prompted traders to further reduce expectations for Federal Reserve rate cuts this year, while reinforcing speculation that the central bank could still raise rates before the end of the year.