Gold Holds Gain as US, Iran Prepare to Sign Interim Peace Deal

Gold prices remained largely steady on Tuesday after rising to a more than one-week high in the previous session, with investors awaiting further details on the U.S.-Iran peace deal. Spot gold was up 0.1% at $4,311.36 per ounce as of 0049 GMT, after having surged over 2% on Monday to hit its highest level since June 5. U.S. gold futures for August delivery, however, saw a slight downturn, dropping 0.4% to $4,332.60.

The interim agreement, announced by U.S. President Donald Trump, aims to extend a tenuous ceasefire (agreed upon in April) by another 60 days and reopen the Strait of Hormuz. This strait has been blocked by Iran since the U.S. and Israel attacked Iran in February. The prospects of this deal have led to reduced expectations for a Fed rate hike in December, falling to 58% from around 70%, as indicated by the CME FedWatch tool. This is largely due to the deal sending oil prices lower and easing inflation fears, which, in turn, lessens the likelihood of the Fed needing to raise interest rates, a positive for non-yielding gold.

Analysts like David Meger, director of metals trading at High Ridge Futures, noted that the potential agreement has driven down short-term interest rates and energy prices. Ricardo Evangelista, an analyst at ActivTrades, added that these reports have caused oil prices to drop and dissipated the worst inflationary fears, leading investors to trim expectations of central bank interest rate hikes. Citi also reflected this optimism by raising its 0-3 month gold price forecast by $500 to $4,500 per ounce.

While gold prices firmed, the broader market is now looking ahead to a series of central bank meetings this week, including the Federal Reserve's rate decision on Wednesday, the first under new Chairman Kevin Warsh. Investors will be scrutinizing the FOMC meeting for any hints of a more dovish stance, which could further support gold prices. Other precious metals also saw mixed movements, with spot silver falling 0.4% to $69.74 per ounce, platinum losing 0.4% to $1,761, and palladium down 1.3% to $1,331.59.