Gold climbs as Middle East peace hopes push oil, dollar lower

Gold rose more than 1 per cent on Monday as hopes of a peace deal to end the Iran war sent the dollar and oil prices lower, easing fears of inflation and higher-for-longer interest rates, reports Reuters.
Spot gold was up 1.5 per cent at $4,574.17 an ounce by 1118 GMT and US gold futures for June delivery gained 1.2 per cent to $4,576.00. US markets were closed for Memorial Day.
The market remained optimistic despite the US and Iran playing down the chances of an imminent deal after US President Donald Trump had said on Saturday that the two countries had largely negotiated a memorandum of understanding on an agreement that would reopen the Strait of Hormuz.
The two sides remain at odds on several difficult issues that must be resolved if they are to bring an end to the three-month-old war.
Equities rallied while oil prices fell below $100 a barrel and hit two-week lows, with the dollar hovering around a one-week low.
"Financial assets are strongly influenced by oil prices at present, and gold prices are not an exception," said UBS analyst Giovanni Staunovo.
"Lower oil prices lift gold, in anticipation that it impacts the monetary policy of the Federal Reserve," Staunovo said, adding that he expects this trend to continue in the near term.
Gold has fallen by about 14 per cent since the Iran war began in late February, supported by elevated energy prices that have sparked inflation concerns and the prospect of higher US interest rates.
Traders now see a 40 per cent chance of the Fed raising US interest rates by 25 basis points in December. That represents a sharp shift from expectations before hostilities erupted, when economists widely predicted two rate cuts this year.
Kevin Warsh was sworn in as chair of the US Federal Reserve on Friday at a pivotal moment for the American economy as surging gasoline prices resulting from the Middle East conflict fuel inflation and erode consumer sentiment.
Spot silver climbed 3.6 per cent to $78.23 an ounce, platinum rose 2.4 per cent to $1,969.12 and palladium was up 3.4 per cent at $1,393.78.