Gold Surges Past $4,300 as Iran Deal Eases Inflation Fears Ahead of Warsh’s First Fed Meeting

Gold rallied to $4,329 on US-Iran peace deal, weakening dollar, and lower rate hike odds. All eyes on Fed's new chair Warsh and dot plot.

Gold staged a powerful comeback on Monday, vaulting above the $4,300 threshold and hitting an intraday peak of $4,344 an ounce. The rally, which saw spot prices climb by more than 2.5 percent to settle around $4,329, snapped a weeks-long correction just as the Federal Reserve prepares for a critical policy meeting under its new chairman.

The trigger was a preliminary peace framework between the United States and Iran. Markets seized on the prospect of de-escalation in the Middle East, sending crude oil tumbling. Brent and WTI both shed over 4 percent, falling to their lowest levels since March, as the agreement envisions reopening the Strait of Hormuz. Lower energy costs immediately dampened global inflation expectations, reducing the urgency for further rate hikes by the Fed.

That shift was reflected in the currency markets. The US dollar slid to a ten-day low, with the dollar index dropping to 99.55 points. A weaker greenback makes dollar-denominated gold cheaper for international buyers, adding further fuel to the rally. Before the accord was announced, traders had priced in a 69 percent probability of a rate increase in December; that figure has now fallen to roughly 50 percent.

All attention now turns to the Federal Open Market Committee, which convenes on Tuesday and Wednesday — the first meeting chaired by Kevin Warsh, who took office in late May. No change in the federal funds rate is expected this week, but the updated dot plot, due for release on June 17, will be scrutinised for clues on the committee’s forward guidance. For Warsh, it is an immediate test of his leadership amid a rapidly shifting geopolitical landscape.

Despite Monday’s surge, gold remains technically constrained, trading below key moving averages. Other precious metals followed suit: silver, platinum and palladium each posted gains of more than 3 percent on the day.

Beyond the macro headlines, structural demand from institutional buyers continues to support the metal. Central banks added a net 244 tonnes of gold in the first quarter, the fastest pace of accumulation in over a year. China’s central bank extended its buying streak to an 18th consecutive month in April, underscoring the sovereign appetite for reserves diversification.

Retail and high-net-worth investors are also piling in. In India, gold ETFs attracted inflows of roughly $3.7 billion in the first quarter — nearly six times the year-ago figure. Wealthy individuals and smaller investors now hold 42 percent of the assets in those funds, using the metal as a hedge against economic volatility.

On a year-to-date basis, gold is still up almost 28 percent, though the short-term direction hinges on Warsh’s dot plot. A hawkish surprise could quickly derail the current recovery; a more moderate stance would leave the door open for further gains. For now, the combination of a fragile peace dividend, falling inflation expectations, and relentless central bank buying has given the bullion market a powerful new tailwind.