June 16 (Reuters) – Gold prices rose more than 1% on Tuesday as expectations of an interest-rate hike from the U.S. Federal Reserve this year eased, following an interim U.S.-Iran peace deal that lowered oil prices and reduced inflation fears.
Spot gold was up 0.8% at $4,338.86 per ounce as of 1:55 p.m. ET (1755 GMT). Prices touched their highest level since June 5 in the previous session.
U.S. gold futures for August delivery settled around 0.1% higher at $4,354.4.
The interim deal announced by U.S. President Donald Trump would extend a tenuous ceasefire agreed upon in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the U.S. and Israel attacked Iran in February.
“Supporting the market over the last two sessions has been the prospects of an agreement between the U.S. and Iran in regards to ending the war,” said David Meger, director of metals trading at High Ridge Futures.
“What we’ve seen as a result of that has been short-term interest rates drop, energy prices come down, and less likelihood that the Fed will need to raise interest rates later this year.”
Brent crude futures dropped below $80 a barrel for the first time since early March, after sinking nearly 5% on Monday on the announcement of the interim deal. [O/R]
Markets have pared back expectations for a Fed rate hike in December to 60% from around 70% last week, according to the CME FedWatch tool.
Bullion has been under pressure from the U.S.-Israeli war with Iran, as rising oil prices fuel expectations of prolonged high interest rates. Despite being an inflation hedge, non-yielding gold suffers in a high-interest-rate environment.
Market participants are awaiting a series of central bank meetings this week, including the Fed’s rate decision on Wednesday, the first under new Chair Kevin Warsh.
Spot silver rose 0.3% to $70.22 per ounce. Platinum gained 2.8% to $1,816.65, and palladium firmed 0.7% to $1,358.06.
(Reporting by Anjana Anil in Bengaluru; Editing by Shailesh Kuber, Rod Nickel and Aurora Ellis)
