Spot gold prices rose sharply on Monday, hitting a near one-week high. The U.S. and Iran reached a preliminary peace framework, which drove crude oil prices lower. Gold (XAUUSD) jumped $128.98, or 3.06%, to $4,347.54 by 12:52 GMT.
U.S. and Iranian officials announced the framework agreement to end conflict and reopen the Strait of Hormuz. Pakistan’s Prime Minister Sharif expects the formal signing in Switzerland on Friday. June WTI crude oil dropped roughly 5%, and Spot Brent crude fell toward $82.90 a barrel.
Lower crude prices reduce inflation expectations and bets on interest rate hikes. CME FedWatch data showed December rate hike expectations fell to about 53% from 69% a week ago. The 10-Year U.S. Treasury yield dropped over 2 basis points to 4.459%, while the 2-Year yield fell over 3 basis points to 4.054%.
The U.S. Dollar Index hovered near a 10-day low, as the peace framework pulled safe-haven flows from the dollar. A weaker dollar makes gold cheaper for buyers outside the United States. Risks remain, however, as the formal agreement is not yet signed, and Iran’s nuclear program is still a factor. Central banks, including the Federal Reserve, will announce policy decisions this week, with Fed Chair Kevin Warsh’s tone on inflation being a key focus for traders.