Gold (XAU/USD) is trading above $4,300, remaining robust but below its weekly high and the 200-day Simple Moving Average (SMA). This is primarily due to renewed optimism surrounding an interim US-Iran peace arrangement, which has softened the US Dollar and reduced the opportunity cost of holding gold.
The US and Iran have agreed to a framework peace deal including a 60-day ceasefire, the reopening of the Strait of Hormuz, and technical talks on Iran’s nuclear program. This deal, set for an official signing ceremony on Friday, has eased fears of escalating tensions and potential supply disruptions, sending oil prices lower and thus reducing inflation concerns.
The prospect of lower inflation has led traders to scale back expectations for a Federal Reserve interest rate hike in December 2026. Initially, there was a 70% chance of a December hike, but after the peace deal announcement, this dropped to around 57%-60%. This repricing of Fed expectations is a key factor supporting gold prices, as the precious metal typically benefits from lower interest rates.
Investors are now closely watching the Federal Open Market Committee (FOMC) policy meeting scheduled for Wednesday. While the Fed is widely expected to keep interest rates unchanged, market attention will focus on updated economic projections and the post-meeting press conference by new Fed Chair Kevin Warsh. His stance on inflation and future policy direction will be crucial in determining further gold price movements. A dovish signal could further boost gold, while a hawkish outlook might exert some pressure.
Spot gold was up 0.8% at $4,338.97/oz, touching its highest level since June 5, while US gold futures added 0.1% to settle at $4,354.40/oz. The yield on the 10-year US Treasury note declined more than 3 basis points to 4.43%, further reflecting moderating inflation fears and supporting gold.
