NEW YORK: Gold prices rose more than 1 percent on Tuesday as expectations of an interest rate hike from the US Federal Reserve this year eased, following an interim US-Iran peace deal that lowered oil prices and reduced inflation fears.
Spot gold was up 0.9 percent at USD4,346.09 per ounce as of 12:15 p.m. ET (1615 GMT). Prices touched their highest level since June 5 in the previous session.
US gold futures added 0.4 percent to USD4,366.50. The interim deal announced by US President Donald Trump would extend a tenuous ceasefire agreed upon in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the US and Israel attacked Iran in February.
“Supporting the market over the last two sessions has been the prospects of an agreement between the US and Iran in regards to ending the war,” said David Meger, director of metals trading at High Ridge Futures.
“What we’ve seen as a result of that has been short-term interest rates drop, energy prices come down, and less likelihood that the Fed will need to raise interest rates later this year.”
Brent crude futures dropped below USD80 a barrel for the first time since early March, after sinking nearly 5 percent on Monday on the announcement of the interim deal.
Markets have pared back expectations for a Fed rate hike in December to 59 percent from around 70 percent last week, according to the CME FedWatch tool.
Bullion has been under pressure from the US-Israeli war with Iran, as rising oil prices fuel expectations of prolonged high interest rates. Despite being an inflation hedge, non-yielding gold suffers in a high-interest-rate environment.
Market participants are awaiting a series of central bank meetings this week, including the Fed’s rate decision on Wednesday, the first under new Chair Kevin Warsh.
Spot silver rose 0.4 percent to USD70.29 per ounce. Platinum gained 2.5 percent to USD1,811.15, and palladium firmed 0.7 percent to USD1,357.91.
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