Gold Rebounds as Oil Prices Retreat

Gold rose 1% toward $4,100 an ounce on Monday as easing tensions between the US and Iran sent oil prices sharply lower, easing inflation concerns and reducing fears that the Federal Reserve may need to tighten monetary policy more aggressively ahead of its meeting later this week. Brent crude retreated from two-month highs after Washington and Tehran paused hostilities, raising hopes that a diplomatic resolution could de-escalate the conflict and ensure the safe passage of shipping through the Strait of Hormuz. Iran said it would suspend further attacks as long as the US maintained its pause in military operations. Investors now await the Federal Reserve's policy decision on Wednesday. Markets currently assign about a 30% probability of a rate hike this week and roughly an 80% chance of another increase in September.

Gold climbed 1% toward $4,100 an ounce on Monday, moving away from nine-month lows as oil prices dropped sharply following a pause in hostilities between the US and Iran over the weekend, reducing concerns over supply disruptions and inflation. The US suspended its nearly two-week campaign of strikes against Iran beginning late Friday without an official announcement, while Tehran said it had ended its retaliatory strikes in response and held discussions with Oman regarding the Strait of Hormuz. Gold struggled in recent weeks amid escalating hostilities in the Middle East, with supply disruption spreading from the Strait of Hormuz to the Red Sea. Meanwhile, the Federal Reserve is widely expected to leave interest rates unchanged on Wednesday before raising them in September, although some market participants believe the central bank could move as early as this week's meeting in response to renewed inflationary pressures.

Gold prices were little changed at around $4,050 per ounce on Friday, steadying after a nearly 2% drop in the previous session as investors monitored developments in the Middle East for clues on energy-driven inflation risks and the outlook for US interest rates. Higher oil prices, driven by concerns over Gulf supply disruptions, have reinforced expectations that interest rates could remain higher for longer, reducing the appeal of non-yielding gold. Investors now await next week's Federal Reserve meeting, where rates are widely expected to remain unchanged, though markets still price in an roughly 80% chance of a hike in September. Meanwhile, the European Central Bank kept rates unchanged on Thursday while leaving the door open to a September increase. In Asia, gold discounts in India widened to a seven-week high as higher prices curbed demand, while buying interest improved in China.