Key Takeaways:
COMEX gold rose 2.5% to $4,322 an ounce on Monday as a US-Iran peace deal pushed oil lower and curbed rate-hike bets.
"The peace deal is about as supportive as you can get for markets, especially after the excitement triggered by the SpaceX IPO," John Hardy, a strategist at Saxo Bank, said.
Brent crude fell 5% to $83 a barrel, well off its May peak of $126.41, after Pakistani Prime Minister Shehbaz Sharif confirmed an interim agreement and President Donald Trump said the pact includes reopening the Strait of Hormuz. Two-year Treasury yields dropped 6 basis points to 4.02%, while the dollar index eased 0.3%, with markets now pricing only a 30% chance of a Fed rate hike as soon as October.
Gold had fallen to a six-month low of $4,022 earlier this week as sticky inflation data reinforced expectations that the Federal Reserve would keep rates elevated. A sustained decline in energy costs could ease inflationary pressures and reduce the need for tightening — a dynamic that will be tested at Chair Kevin Warsh's debut Federal Reserve meeting on Wednesday, where the central bank is expected to hold rates at 3.50% to 3.75%.
CBA mining and energy analyst Vivek Dhar said he sees Brent falling to $80 by year-end, assuming the strait does not close again. "Our forecast implicitly assumes that oil and refined product exports can resume quickly through the Strait of Hormuz, but this view carries considerable uncertainty tied to the damage to oil and refinery assets," Dhar said.
Iran said traffic through the strait would be regulated by it and Oman, a potential blow to free-trade rules that suggests some form of toll on transits. France and Britain are pushing plans for a multinational naval mission to safeguard shipping through the waterway, though it remains unclear whether Tehran would accept such an operation.
Gold at $4,322 remains well below its January peak above $5,300 but has recovered 7.5% from the six-month low touched earlier this week. The metal's rally was supported by a weaker dollar, with the euro rising 0.4% to $1.1617 and sterling gaining 0.3% to $1.3446.
The drop in yields also lifted non-interest-paying gold, with the 2-year Treasury yield falling to 4.02%. Markets have pushed back expectations for a Fed rate hike, with a 25-basis-point increase now not fully priced until March 2027, according to rate futures data.
This article is for informational purposes only and does not constitute investment advice.
