Gold Climbs as Peace Deal Optimism Balances Hawkish Fed Sentiment -

Gold prices surged, supported by the recent signing of an interim peace agreement between the US and Iran, despite indications from the Federal Reserve of a potential interest rate hike later this year.

The price of bullion increased by up to 1.7%, reaching $4,328 per ounce, recovering from a decline in the previous session. US and Iranian officials finalized the peace deal electronically on Wednesday evening; however, it remains uncertain if the Strait of Hormuz has reopened.

Oil prices fell, as the agreement is expected to ease a global energy crisis that has driven inflation and speculation regarding rate hikes. Nonetheless, questions persist about how quickly fuel prices may decrease and when passage through the strait can revert to pre-crisis levels.

“Falling oil prices will offer some relief,” stated Christopher Wong, a strategist at Oversea-Chinese Banking Corp. “However, the Fed’s position complicates matters, necessitating a cautious outlook for gold in the short term, even if the medium-term prognosis looks favorable.”

The Fed maintained steady interest rates on Wednesday, reinforcing its commitment to price stability and avoiding any mention of future rate changes. Traders are fully expecting monetary policy to tighten by October. High interest rates present challenges for precious metals, which do not accrue interest.

Ryan Mckay, senior commodity strategist at TD Securities, noted that the anticipation of a rate hike was “already priced in” ahead of the Fed’s latest announcement. “The overall outlook remains bearish for gold,” he remarked, highlighting that a significant shift in the Fed’s viewpoint would be necessary to influence market sentiment in precious metals.

As of 9:21 a.m. Singapore time, spot gold had risen by 1.6% to $4,322.83 per ounce. Silver climbed 2.5% to $69.61, recovering from a 3% decline in the previous session. Both platinum and palladium also recorded increases. The Bloomberg Dollar Spot Index decreased by 0.2%, following a 0.7% rise in the prior session.