Gold price surges near $4,300

Gold continued to post its largest gains in six months, supported by progress in talks to resume navigation through the Strait of Hormuz and falling oil prices, which eased expectations of a U.S. interest rate hike. Iran and Oman reached an understanding regarding a temporary navigation route. Federal Reserve official Lisa Cook warned against raising interest rates if inflation persists, while central banks increased their gold reserves. The precious metal rose as much as 1.4%, briefly surpassing $4,300 per ounce, before trimming its gains to trade slightly below that level, after surging 4.1% in the previous session, marking its largest daily gain since February 3. The move was also bolstered by a breakout above a key technical resistance level, which triggered additional buying after gold’s limited gains in its first two sessions of the week. However, the primary driver of the rally was not a return of geopolitical fears, but rather the opposite. Progress in talks concerning the Strait of Hormuz pushed oil prices lower and eased concerns about a prolonged energy shock that had fueled inflation and forced markets to anticipate that U.S. interest rates would remain elevated for longer. Iran stated it had reached an understanding with the Sultanate of Oman regarding a proposed shipping route through the strait, which would allow for the resumption of part of the energy flows. The temporary route will remain active for a period ranging from two to four months, according to Iranian Deputy Foreign Minister Kazem Gharibabadi, who emphasized that the understanding does not mean “fully reopening the strait.” U.S. President Donald Trump also said that negotiations with Iran are ongoing and that he prefers reaching an agreement with Tehran to end the war militarily, after earlier suggesting that a deal could be reached as soon as Wednesday U.S. time. These developments present gold with an unconventional equation. Typically, a reduction in geopolitical tensions would be expected to lower demand for the metal as a safe-haven asset. However, these political developments ease pressure on energy prices and inflation, reducing the need for interest rate hikes.