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The rally today can be attributed to a weakening dollar following the announcement of a peace deal between the US and Iran.
Bullion markets have scaled back expectations of a Federal Reserve rate hike in December, with the probability falling to 48% from 69% a week earlier.
Gold and silver prices rebounded at the start of the week after the United States and Iran announced an initial framework agreement to end their conflict, easing concerns over disruptions in global energy supplies and helping weaken the US dollar.
According to Gaurav Garg, Research Analyst at Lemonn Markets Desk, gold was trading around $4,350.60 per ounce, while silver climbed to $70.49 per ounce. “The rally can be attributed to a weakening dollar following the announcement of a peace deal between the US and Iran, which has boosted investor sentiment towards precious metals as safe-haven assets,” Garg said.
The development comes as crude oil prices fell sharply, with WTI crude trading at $80.81 per barrel. The decline in oil prices follows expectations that the reopening of the Strait of Hormuz and easing geopolitical tensions could improve global energy supplies.
What Is Driving Gold Prices?
Renisha Chainani, head of research at Augmont, said precious metals had been caught between two opposing forces in recent weeks, rising inflation concerns and improving geopolitical conditions.
While inflation data from the US and Europe revived concerns about higher interest rates, the announcement of a US-Iran peace framework has helped reduce fears of prolonged energy disruptions and persistent inflation.
The agreement is expected to be formally signed in Switzerland this Friday. The announcement pushed the US dollar to a 10-day low and led to a more than 4% decline in oil prices.
According to Chainani, markets have also scaled back expectations of a Federal Reserve rate hike in December, with the probability falling to 48% from 69% a week earlier.
What Should Gold Investors Watch?
Chainani believes underlying support factors for gold remain intact. “Currency debasement concerns, elevated fiscal risks, and deepening geopolitical fragmentation continue to support long-term allocations,” she noted.
Technically, gold is trading near $4,330.
- Immediate resistance is seen in the $4,500-$4,550 zone.
- A breakout above this range could strengthen bullish momentum.
- Key support remains around $4,060.
According to Augmont, a hawkish Federal Open Market Committee (FOMC) outcome could drag prices back towards the $4,000-$4,100 range, while a neutral or dovish stance may pave the way for a move towards $4,500.
What About Silver?
Silver has also benefited from the recovery in precious metals. Chainani said silver’s ability to hold above the $70 mark has opened the possibility of a move towards the $72-$75 range.
- Key support lies at $60-$61.
- Resistance is placed at $78-$80.
- A sustained move above the resistance zone could trigger a fresh bullish rally.
However, she cautioned that industrial demand uncertainties and the upcoming FOMC decision continue to influence near-term price action.
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