Gold Holds Gain as US-Iran Talks Progress

Gold traded above $4,550 an ounce on Tuesday after rising about 1% in the previous session, supported by indications that the US and Iran were moving closer to an agreement that could end the conflict and reopen the Strait of Hormuz. Negotiations between Washington and Tehran have reportedly centered on extending the ceasefire for roughly two months, during which the US would lift its blockade while Iran would allow shipping through Hormuz to resume. However, major obstacles remain, particularly over Iran’s nuclear program and its insistence on retaining control over maritime traffic in the strategic passage. Meanwhile, oil prices declined sharply, easing worries about inflationary pressures and the prospect of further interest rate hikes. Despite the recent rebound, gold prices are still down roughly 13% since the conflict began, as fears of an energy-driven inflation shock strengthened expectations that central banks could keep monetary policy tighter for longer.

Gold climbed toward $4,600 an ounce on Monday, recovering losses from last week as increasing optimism over a potential US-Iran agreement eased concerns about inflation and interest rate hikes. Reports indicated that the proposed deal could reopen the Strait of Hormuz, end hostilities, release some frozen Iranian assets, and lay the groundwork for additional negotiations aimed at restricting Tehran’s nuclear program. However, President Donald Trump said the US would keep its blockade of the Strait of Hormuz in place until a formal agreement is finalized. Despite Monday’s rebound, gold remains roughly 13% lower since the Middle East conflict began, as fears of an energy-driven inflation shock fueled expectations that central banks may need to maintain tighter monetary policy. Investors also continued to assess the outlook for Federal Reserve policy after Governor Christopher Waller signaled he no longer believed the central bank should retain an easing bias in its policy statement.

Gold fell to $4,500 per ounce on Friday, heading for a second consecutive weekly decline, as elevated oil prices fueled inflation concerns and boosted expectations for a US interest rate hike this year. Crude held near four-year highs as investors remained cautious about the prospects for a breakthrough in US-Iran peace talks. Iranian media reported that Iran’s foreign minister met Pakistan’s interior minister on Friday to discuss proposals to end the war, while US Secretary of State Marco Rubio noted "slight progress" in mediated talks but warned that Washington and Tehran were "not there yet" on a peace deal. The prolonged conflict and inflation pressures led markets to price in a Federal Reserve rate hike before year-end, with about a 55% chance of at least one 25-basis-point increase by October. Supporting this view, Fed Governor Christopher Waller signaled he no longer believed the central bank should maintain an easing bias in its policy statement.