Gold prices surged by more than 1% on Monday, with spot gold climbing 1.4% to $4,110.56 an ounce and U.S. gold futures advancing 1% to $4,112.10 an ounce. This rise comes amidst a temporary de-escalation of tensions between the United States and Iran, which typically reduces demand for safe-haven assets. However, the gains were supported by a weaker U.S. dollar, which fell 0.3% against a basket of currencies, making dollar-denominated gold more attractive to holders of other currencies.
The easing of hostilities also led to a significant drop in crude oil prices, with Brent crude falling nearly 7% to $90.14 a barrel, and U.S. West Texas Intermediate (WTI) plunging over 4% to around $84 per barrel. This decline in oil prices and reduced geopolitical risk premiums contributed to a modest pullback in U.S. Treasury bond yields, with the 10-year yield falling about 5 basis points to 4.629%. Falling bond yields and oil prices typically bode well for central banks like the Federal Reserve and the Bank of England, easing concerns about immediate interest rate hikes.
Despite the positive turn in gold and other precious metals—silver climbed 2.8% to $59.81, platinum rose 2.6% to $1,629.15, and palladium added 2.1% to $1,269.43—market participants remain cautious. Traders are hesitant to place aggressive bearish bets on the U.S. dollar and are closely watching the outcome of the two-day FOMC meeting and other economic data for clues on the Federal Reserve's policy path. Analysts expect the Fed to keep rates on hold at 3.50%-3.75%, although some market sentiment suggests a 31.5% probability of a rate hike. Meanwhile, the Bank of England is also largely expected to maintain its rates at 3.75% this week.
