Gold rises as Middle East fighting pause weighs on oil

Gold prices rose modestly on Monday, supported by sliding Treasury yields and a weaker U.S. dollar, as investors gauged inflation expectations after oil prices dropped amid a pause in Middle East hostilities.

Spot gold rose 0.7% to $4,082.42 an ounce by 09:37 ET (13:37 GMT), while gold futures expiring in August inched up 0.3% to $4,083.25 an ounce.

The gains came as oil prices fell sharply, wiping out much of last week’s war premium that had briefly pushed Brent crude to the $100-a-barrel mark. U.S. Treasury yields, which tend to move inversely to prices, eased, with the benchmark 10-year yield in particular on track for its biggest decline in a month.

Also supporting bullion was a decline in the U.S. dollar index, a tracker of the greenback against a basket of currency peers. A cheaper dollar can make gold less expensive for overseas buyers.

Triggering these the moves was a pause in fighting between the United States and Iran over the weekend, which rekindled hopes for diplomatic efforts to secure a lasting ceasefire agreement.

Following 13 straight nights of U.S. strikes on Iranian targets, President Donald Trump halted the bombing campaign late on Friday. Iran also refrained from launching retaliatory attacks against neighboring countries hosting U.S. military bases over the weekend.

Market participants are now focused on the Federal Reserve’s policy decision later this week. While lower oil prices could reduce inflation pressures, investors are awaiting the Fed’s assessment of the economic outlook following recent market volatility.

The central bank is widely expected to leave interest rates unchanged on Wednesday, but there is still a one-in-three chance of a borrowing cost hike, according to CME FedWatch. Traders will closely scrutinize Chair Kevin Warsh’s remarks for clues on the timing of future rate cuts and policymakers’ assessment of inflation risks.

Investors will also be monitoring upcoming U.S. economic data, including inflation and labor market indicators, for further signals on the Fed’s policy path.

The trajectory of Fed interest rates is crucial for gold, as the non-yielding asset tends to underperform in elevated rate environments.