Gold climbs over 1% after oil slump as markets react to new US-Iran ceasefire pact

Gold prices rose more than 1 per cent on Thursday, recovering from a steep selloff in the previous session, as falling oil prices following a new US-Iran ceasefire agreement eased inflation concerns and boosted demand for the precious metal.

Spot gold climbed 1.4 per cent to $4,316.42 per ounce in early trade after tumbling 1.7 per cent on Wednesday. US gold futures for August delivery, however, slipped 1 per cent to $4,336.70 as investors continued to assess the outlook for US interest rates.

The rebound came after Washington and Tehran released the text of a 14-point interim agreement extending a ceasefire first announced in April by another 60 days, giving both sides more time to negotiate a permanent peace settlement. The agreement has fuelled expectations of a further easing in geopolitical tensions across West Asia and a potential increase in global oil supplies.

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Oil prices fell for a second straight session, reversing gains made earlier this week. Brent crude slipped around 1.4 per cent to $78.41 a barrel, while US West Texas Intermediate crude declined 1.25 per cent to $75.83. Markets are increasingly betting that a lasting truce could reopen key trade routes and eventually bring more Iranian oil back into global markets.

Lower oil prices tend to reduce inflationary pressures, easing concerns that central banks will need to keep interest rates elevated for longer. While gold is often viewed as a hedge against inflation and geopolitical uncertainty, higher interest rates typically weigh on the metal because it does not offer any yield.

Despite Thursday's recovery, analysts said gains in bullion could remain limited after the US Federal Reserve signalled that interest rates may need to rise further this year.

The Fed on Wednesday kept its benchmark policy rate unchanged at 3.50 per cent to 3.75 per cent, but updated projections showed a growing number of policymakers expecting at least one rate hike before the end of the year. Nine of the central bank’s 19 policymakers now anticipate higher rates in 2026.

According to CME FedWatch data, traders now see an 85 per cent probability of a US rate increase in December, up sharply from 61 per cent before the Fed’s latest policy decision.

Broader financial markets remained cautious. Asian equities traded largely flat as investors weighed the implications of the US-Iran agreement against the prospect of tighter US monetary policy. On Wall Street, all three major US indexes fell more than 1 per cent overnight after investors interpreted the Fed’s projections as signalling higher borrowing costs ahead.

Other precious metals also advanced. Spot silver rose 1.8 per cent to $69.18 per ounce, platinum gained 1.2 per cent to $1,757.53, while palladium added 1.3 per cent to $1,329.99.

The competing forces of easing geopolitical tensions and rising interest-rate expectations are likely to remain the key drivers for gold in the coming weeks, with investors closely monitoring developments in the US-Iran negotiations as well as future signals from the Federal Reserve.