Gold prices rebounded on Monday as spot gold rose 1.1% to $4,504.07 per ounce by 1:31 p.m. EDT, following a memorandum of understanding between the U.S. and Iran on a 60-day ceasefire extension. This development, pending approval by U.S. President Donald Trump, has positively influenced market sentiment.
U.S. gold futures also saw an increase, settling 1.1% higher at $4,532.40. The ceasefire agreement, coupled with a 0.2% decline in the U.S. dollar index, made gold more attractive to overseas buyers. Meanwhile, Brent prices eased following the report.
The U.S. personal consumption expenditures price index showed a 3.8% increase over the 12 months through April, aligning with expectations. The index rose 0.4% month-on-month in April, after a 0.7% rise in March. This data suggests the Federal Reserve might hold interest rates steady, according to Bart Melek, global head of commodity strategy at TD Securities.
“The trading gods seem to be intervening in gold today. First, the weak PCE, and now reports of an imminent deal that would open Hormuz, are giving gold a much-needed reprieve.”
Tai Wong, Independent Metals Trader
Gold has faced pressure since the U.S.-Israeli conflict with Iran began in late February, amid inflation concerns. Despite its safe-haven status, gold tends to underperform when interest rates rise as investors shift towards yield-bearing assets.
Elsewhere, China's net gold imports via Hong Kong surged 81.2% in April compared to the previous month, indicating strong demand from the region.
“The PCE data suggests that the Federal Reserve may hold rates rather than pursue further tightening.”
Bart Melek, Global Head of Commodity Strategy at TD Securities
Background
Gold has been under pressure since the onset of the U.S.-Israeli conflict with Iran in late February, amid inflation concerns. Despite its safe-haven appeal, bullion underperforms when interest rates rise, as investors gravitate toward yield-bearing assets.
Looking ahead, investors will closely monitor the Federal Reserve's next moves on interest rates, as well as geopolitical developments, which could further impact gold prices.
