Gold Holds Gains as Oil Prices Retreat and Fed Decision Looms

Gold prices edged higher on Tuesday as declining oil prices and growing optimism over a potential U.S.-Iran peace agreement supported investor sentiment. However, gains remained limited as markets awaited the Federal Reserve’s closely watched interest rate decision scheduled for Wednesday.

Spot gold rose 0.5% to $4,330.68 per ounce, while gold futures advanced slightly to $4,352.51 per ounce. The precious metal extended its recovery after posting strong gains on Monday following news that Washington and Tehran had reached a preliminary agreement aimed at ending months of conflict and reopening the Strait of Hormuz.

The prospect of restored oil flows through one of the world’s most important energy corridors pushed crude prices lower, easing concerns about inflationary pressures driven by higher energy costs. Lower inflation expectations typically reduce the likelihood of aggressive interest rate hikes, creating a more favorable environment for non-yielding assets such as gold.

According to market analysts, gold has rebounded significantly from recent lows as geopolitical tensions have eased and the U.S. dollar has weakened. The planned signing of a memorandum of understanding (MoU) between the United States and Iran in Switzerland later this week has further improved market confidence. President Donald Trump stated that the Strait of Hormuz is expected to reopen fully following the signing and described the agreement as a major step toward long-term regional stability.

Despite the positive outlook, uncertainty remains regarding the agreement’s details, particularly concerning Iran’s nuclear commitments. Conflicting reports from U.S. and Iranian officials have left several key aspects unresolved.

Meanwhile, oil prices fell below $80 per barrel for the first time since March, reducing pressure on central banks to tighten monetary policy. Investors are now focused on the Federal Reserve’s policy announcement under new Chair Kevin Warsh. The Fed is widely expected to keep interest rates unchanged while releasing updated economic forecasts.

Market expectations for additional U.S. rate hikes have softened following the U.S.-Iran breakthrough, with traders lowering the probability of another increase before year-end. Investors are also monitoring global monetary policy developments after the Bank of Japan raised interest rates to their highest level in over three decades, while the Reserve Bank of Australia left rates unchanged.