Gold Surges Above $4,200 as Hormuz Deal Hopes Temper Fed Hike Bets

Gold Extends Rally on Hormuz Developments and Softer Dollar

At 02:07 ET (06:07 GMT), spot gold (XAU/USD) jumped 2.1% to $4,162.79 an ounce, while Gold Futures gained 1.7% to $4,222.92. Silver (XAG/USD) advanced 3.2% to $61.45 an ounce, and platinum (XPT/USD) rose 1.8% to $1,768.95.

Prices extended gains for a third consecutive session as signs of progress toward reopening the Strait of Hormuz eased fears that disruptions to global energy supplies would keep inflation elevated. Qatar said a proposal had been drafted to restore shipping through the key waterway, while Axios reported that Washington, Tehran and Oman were close to an interim agreement, with U.S. officials targeting a possible announcement as early as Wednesday.

U.S. Treasury Secretary Scott Bessent indicated that a deal to reopen the Strait could come as soon as Tuesday or Wednesday, reinforcing expectations that energy markets may stabilize. The prospect of lower oil prices led traders to further scale back expectations for Federal Reserve tightening, with markets now fully pricing in just one additional U.S. rate increase by year-end, down from two anticipated as recently as last week.

The US Dollar Index edged lower, making dollar-denominated bullion more attractive for overseas buyers and providing additional support to precious metals.

Fed Outlook and Chinese Demand Underpin Market

Gold has declined more than 20% since the U.S.-Iran conflict began in late February, as higher oil prices intensified inflation concerns and bolstered expectations that interest rates would remain elevated for longer. The Federal Reserve left policy unchanged for a fifth straight meeting last week, though three policymakers dissented in favor of a rate increase, underscoring ongoing uncertainty over the policy path.

Philadelphia Federal Reserve President Anna Paulson said she remains “open-minded” about the outlook, citing mixed signals on whether current monetary settings are sufficiently restrictive. Kansas City Fed President Jeff Schmid argued that higher interest rates may still be required to restore price stability and cautioned against assuming that inflation pressures from supply shocks will fade quickly.

Support for bullion has also emerged from China. Bloomberg data showed that Chinese gold-backed exchange-traded funds recorded inflows for a 14th consecutive trading day through Monday, marking the longest streak since March and pointing to renewed institutional participation after months of outflows. This buying has helped keep gold trading above the psychologically important $4,000-an-ounce level, suggesting Chinese demand is cushioning the market amid broader uncertainty over the Fed’s trajectory.

FAQ

What drove gold above $4,200 an ounce?
Gold rose above $4,200 an ounce on growing optimism over an interim agreement to reopen the Strait of Hormuz, reduced inflation concerns, scaled-back expectations for further Federal Reserve rate hikes, and a weaker US dollar.

How have Fed expectations changed?
Markets are now fully pricing in just one additional U.S. rate increase by year-end, compared with expectations for two hikes as recently as last week, as energy and inflation fears have eased.

What role is China playing in gold demand?
Chinese gold-backed ETFs have seen inflows for 14 consecutive trading days through Monday, the longest such streak since March, indicating renewed institutional demand that has helped keep gold above $4,000 an ounce.

How has the U.S.-Iran conflict affected gold this year?
Since the U.S.-Iran conflict erupted in late February, gold has fallen more than 20%, as surging oil prices fueled inflation worries and reinforced expectations that interest rates would stay higher for longer.