Gold Surges Past $4,350 as Iran Ceasefire Unravels Dollar's Safe-Haven Appeal

A diplomatic thaw between Washington and Tehran sends gold soaring over $4,300 while Brent crude plunges 5%. Markets eye Fed decision and Geneva signing ceremony.

Something unusual is happening in the markets: a major diplomatic thaw is sending gold higher while crushing oil prices. That rarely happens, but the weekend's digital ceasefire agreement between Washington and Teheran has turned conventional macro logic upside down. The US dollar is getting pummelled on the deal, and the yellow metal is capitalizing.

The price of gold hit $4,355 per ounce in London trade on Monday — a gain of $126 from Friday's close and more than $300 since last Thursday. At 2.72% on the session, the rally marks one of its best single-day jumps in months. The trigger: Donald Trump and Iran's parliamentary speaker Mohammad Ghalibaf signed a framework pact guaranteeing a 60-day truce and the reopening of the Strait of Hormuz. The official signing ceremony is set for Friday in Geneva, with detailed terms expected within 24 to 48 hours.

The agreement sent Brent crude tumbling roughly 5% toward $83 a barrel, as markets priced in renewed supply flows. That collapse in energy prices drags down inflation expectations, which in turn robs the greenback of its haven lustre. The US Dollar Index slid to 99.38 — a one-week trough — making bullion cheaper for holders of other currencies and feeding the buying frenzy.

Warsh's Fed Looms, but Rate-Hike Bets Are Melting

Attention now shifts to the Federal Reserve's Wednesday decision, the first under the new chair Kevin Warsh. Markets see a 97% probability that the central bank holds rates in the 3.50%-3.75% band. More telling is the outlook beyond June: the implied chance of a December rate hike has slipped to just 55%. That dovish repricing is pulling the yield on the 10-year US Treasury note down to 4.46%, a direct tailwind for an asset that carries no coupon.

Gold is still nursing deep wounds from its earlier selloff — it trades roughly 22% below the all-time high of $5,626 reached in January. Analysts describe the intervening slide as the fastest bear market since the 2008 financial crisis. But a wall of central-bank buying continues to provide a floor. The People's Bank of China added 320,000 ounces to its reserves in May, extending its buying spree to a 19th consecutive month. That physical hoarding, combined with robust demand from Asian markets, is propping up prices.

Not Everyone Is Convinced the Rally Can Last

While bullion traders celebrate, some policymakers urge caution. Bundesbank president Joachim Nagel warned that normalising oil supply could take months, pointing to damaged production facilities. The inflation threat, he argued, has not vanished. Commerzbank called Monday's move "very positive" but noted the war already cost Germany and the eurozone roughly 0.4 percentage points of economic growth. Gold miners are riding the rally; energy stocks are nursing losses on the oil rout.

For now, the market's gaze is fixed on Geneva. If the Friday ceremony delivers on the handshake, the dollar could weaken further and gold might test $4,400. If logistics or politics trip up the process, the 60-day truce could look fragile — and the yellow metal's newfound momentum along with it.