Gold Rises on US‑Iran Framework Deal, Weaker Dollar Underpins Rebound

Gold (XAU/USD) was trading around $4,340 on Monday, up 2.86% for the day, continuing a rebound that started on Thursday from the $4,024 level and reaching its highest point in a week as investors evaluate the newly announced US‑Iran agreement.

Markets responded positively to the framework agreement between Washington and Tehran aimed at ending the conflict. President Donald Trump said the Strait of Hormuz would be reopened under the deal, a claim also confirmed by Iran’s Deputy Foreign Minister. Reports indicate that the ceasefire, established in April, is likely to be prolonged, giving both parties more time to pursue negotiations.

The news sparked a noticeable uplift in market sentiment. US equity index futures rose by 1% to 2%, and crude oil prices declined sharply as investors expect a gradual normalization of global energy flows now that the Strait of Hormuz is slated to reopen.

Simultaneously, the US dollar weakened, with the Dollar Index (DXY) slipping about 0.3% to around 99.50 after a bearish gap at the week’s start. This dollar weakness further supports gold, enhancing its appeal to investors holding other currencies.

Investors are turning their attention to the Federal Reserve’s upcoming policy meeting later this week. In the meantime, they will watch the New York Fed’s Empire State Manufacturing Survey and US industrial production data. Signals about the US economy’s health and the future trajectory of interest rates could affect gold’s direction in the near term.

Nevertheless, caution persists. Lebanese media have reported Israeli strikes in southern Lebanon following the agreement announcement, and the full text of the deal remains unpublished. This ongoing uncertainty sustains safe‑haven demand for gold, keeping it attractive to investors seeking protection from geopolitical risk.

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

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