Gold Rises as Markets Track US-Iran Diplomacy

Gold rose more than 1% to $4,070 an ounce on Tuesday as investors weighed diplomatic efforts to de-escalate the US-Iran conflict and their potential impact on oil prices, inflation risks, and the Federal Reserve’s interest rate outlook.

Reports indicated that mediators are working to bring Washington and Tehran back to the negotiating table, with discussions reportedly including a possible 10-day truce aimed at securing shipping routes through the Strait of Hormuz.

The recent escalation in the conflict pushed oil prices to a more than one-month high, raising concerns that higher energy costs could reinforce inflationary pressures.

This has prompted a growing number of US policymakers to argue that interest rates may need to remain higher for longer, or potentially rise, to contain inflation.

While the Fed is widely expected to keep rates unchanged at next week’s meeting, markets are pricing in more than a 60% probability of a rate hike in September.