Gold prices rose on Tuesday, gaining 0.6% to $2,348 per ounce, as diplomatic progress between the United States and Iran reduced crude oil costs and tempered expectations for aggressive interest rate hikes by major central banks.
The precious metal found support from a decline in benchmark 10-year Treasury yields, which slipped to 4.28% following the release of weaker-than-expected U.S. durable goods orders for April. Lower yields reduce the opportunity cost of holding non-yielding assets like gold.
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Peace talks weigh on oil, lift gold
Reports that U.S. and Iranian negotiators reached a preliminary framework on nuclear enrichment limits pushed Brent crude down 2.1% to $81.40 a barrel. Falling energy prices ease inflation pressures, reducing the urgency for the Federal Reserve to raise rates further.
“A lower oil price acts as a tax cut for consumers and dampens headline inflation,” said Priya Mehta, a commodities strategist at ING Groep in Singapore. “That directly supports gold by lowering the probability of another rate hike in June.”
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According to the CME FedWatch Tool, the probability of a quarter-point rate increase at the Fed’s June 12 meeting fell to 12% on Tuesday, down from 22% a week earlier.
Dollar weakness adds to momentum
The U.S. Dollar Index slipped 0.3% to 104.2, making dollar-denominated gold cheaper for overseas buyers. A weaker dollar typically provides a tailwind for gold, which has gained 14% so far this year.
Gold’s rally comes despite record-high equity markets, with the S&P 500 reaching a fresh all-time high on Monday. Analysts said the divergence reflects lingering geopolitical uncertainty beyond the U.S.-Iran talks, including ongoing tensions in Eastern Europe and trade friction between the U.S. and China.
What this means for investors
For retail and institutional investors, the current environment suggests gold may retain its safe-haven appeal in the near term. If oil prices continue to fall and rate-hike expectations remain subdued, gold could test the $2,400 resistance level in the coming weeks.
However, some analysts caution that a final peace deal between Washington and Tehran remains uncertain. “We’ve seen false dawns in U.S.-Iran negotiations before,” said Mehta. “If talks stall, oil could rebound quickly, reigniting inflation fears and putting pressure on gold.”
Investors are now watching Friday’s U.S. non-farm payrolls report for May, which will provide further clues on the labor market’s trajectory and the Fed’s next policy move.
