Gold rose on Monday as a weaker U.S. dollar and sliding Treasury yields supported the metal, after a pause in U.S.-Iran fighting pulled oil sharply lower. Traders now turn to Wednesday’s Federal Reserve decision, where rates are widely expected to stay unchanged.
Spot gold rose 1.1% to $4,095.37 an ounce by 06:04 ET on Monday, while gold futures expiring in August gained 0.7% to $4,097.40 an ounce. Sliding Treasury yields and a softer greenback carried the metal higher as investors gauged inflation expectations after oil prices slid.
Oil’s retreat and a cheaper dollar lift bullion
The gains came as oil fell sharply, wiping out much of last week’s war premium that had briefly pushed Brent crude to the $100-a-barrel mark. Treasury yields eased as well, with the benchmark 10-year yield on track for its biggest decline in a month.
A decline in the U.S. dollar index also supported bullion, because a cheaper dollar can make gold less expensive for overseas buyers. The index slipped 0.3% on Monday.
Trump halts the bombing campaign
The trigger was a weekend pause in fighting between the United States and Iran, which rekindled hopes for diplomatic efforts to secure a lasting ceasefire agreement. President Donald Trump halted the bombing campaign late on Friday, following 13 straight nights of U.S. strikes on Iranian targets.
Iran refrained from launching retaliatory attacks against neighboring countries hosting U.S. military bases over the weekend. Oil then dropped more than 5%, reversing part of last week’s rally that had been fueled by concerns over disruptions to energy shipments through the Strait of Hormuz and the Red Sea.
Fed decision on Wednesday frames the next move
Market participants are now focused on the Federal Reserve’s policy decision later this week. The central bank is widely expected to leave interest rates unchanged on Wednesday, but CME FedWatch still puts a one-in-three chance on a borrowing cost hike.
Traders will scrutinize Chair Kevin Warsh’s remarks for clues on the timing of future rate cuts and policymakers’ assessment of inflation risks. The trajectory of Fed rates is crucial for gold, as the non-yielding asset tends to underperform in elevated rate environments.
Sources: Investing.com, InvestorsHub
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