The precious metals party continues. Gold prices jumped more than 2% after the US and Iran agreed on a peace deal to end the war, pushing oil prices lower and easing concerns about inflation and higher interest rates. Spot gold climbed 2.5% to $4,322.87 per ounce, hitting its highest level since June 9 and extending gains for a third straight session. Silver too jumped nearly 4% with Spot prices trading above $70 levels.
The sharp uptick was seen after the US and Iranian officials agreed on a framework to end their war, halt the US blockade of Iran and reopen the Strait of Hormuz. The pact will be officially signed on Friday in Switzerland, Pakistani Prime Minister Shehbaz Sharif said in a post on X. The US dollar fell to a 10-day low, making greenback-priced bullion cheaper for other currency holders, while oil prices slipped more than 4%.
Gold, silver prices rally: Street cheers reduced geopolitical risk
The sharp uptick in gold and silver prices highlighted the market’s relief as geopolitical risks reduced. Reuters quoted Tim Waterer, chief market analyst at KCM Trade and highlighted that “Lower oil prices and a softer dollar, stemming from reduced geopolitical risk and the anticipated reopening of the Strait of Hormuz, are helping to calm inflation expectations.”
He added “this combination is providing the precious metal with its best tailwind in recent weeks, though sustainability will depend on how durable the peace agreement proves to be.”
Gold prices have fallen about 20% since the start of the U.S.-Israeli war against Iran in late February. The effective closure of the Strait of Hormuz has led to a sharp increase in global oil prices, stoking inflation concerns and raising expectations of interest rates staying higher for longer.
Speaking on the outlook for gold and silver, Kaynat Chainwala, AVP Commodity Research, Kotak Securities said, “The broader takeaway is that the macro backdrop has turned more constructive for gold, but formalisation risk keeps near-term trade choppy. A firmer push higher likely needs confirmation that yields, oil and the Fed’s hawkish tilt under new chair Kevin Warsh, who runs his first FOMC meeting this week, have all turned decisively. Silver’s outsized move reflects its added sensitivity to the improving risk tone.”
All eyes on US Fed decision later today
The next trigger for gold and silver prices would be the US Fed announcement on interest rates. This will be the first Fed Policy decision under Chairman Kevin Warsh. The expectation thus far is of rates remaining unchanged.