Gold Strengthens, US-Iran Deal Eases Inflation Pressures
Gold prices rose to $4,323 during the Asian session on Tuesday (June 16th) as markets responded to the peace framework agreement between the United States and Iran. XAU/USD continued its rally after President Donald Trump, Vice President JD Vance, and the Speaker of the Iranian Parliament reportedly signed an electronic copy of a memorandum of understanding to end the conflict.
Trump said the Strait of Hormuz was "partially opened" and would be "fully opened" on Friday. This news eased pressure on oil, Treasury yields, and the US dollar. For gold, this condition provides important support because a decline in oil prices can alleviate concerns about energy inflation, while a weaker dollar and yields make gold more attractive.
However, the market remains unsettled as the US and Iran continue to signal conflicting signals on several key details. Iran reportedly wants to impose tolls on the Strait of Hormuz, while Trump stated that the Strait would be opened without tolls. Furthermore, Trump has warned that military strikes could resume if Iran fails to reach a final nuclear deal with the US.
From a monetary policy perspective, the chances of a Federal Reserve interest rate hike have also declined following the US-Iran deal. CME FedWatch shows the probability of a US interest rate hike in December has dropped to 58%, from nearly 70% last week. Since gold offers no yield, expectations of lower interest rates tend to help maintain bullion's momentum.
The market's next focus is on the Fed's decision on Wednesday. The US central bank is expected to keep interest rates in the 3.50%–3.75% range while assessing the impact of surging energy prices on the economy. For gold, its next direction will be influenced by the details of the final US-Iran deal, oil prices, dollar movements, US yields, and the Fed's policy tone.
5 key points:
- Gold strengthened in Asia after the US-Iran peace framework was announced.
- Trump said Hormuz was partially open and would be full by Friday.
- Oil, yields, and a weakening dollar are key supports for gold.
- The probability of a Fed rate hike in December has dropped to 58% from nearly 70%.
- Risks remain as the details of the Hormuz and nuclear agreements are not yet finalized. (asd)*
Source: Newsmaker.id
