Global gold markets have staged another powerful rebound. On Tuesday, June 16th, spot gold prices extended gains, rising 0.5% to settle around $4,331.05 per ounce. The August U.S. gold futures contract also moved higher, settling at $4,354.40. A preliminary peace agreement between the U.S. and Iran not only triggered a significant drop in oil prices but also directly weakened market bets on a Federal Reserve rate hike this year, while putting pressure on the U.S. dollar, collectively providing further support for gold's recovery.
U.S.-Iran Peace Agreement: A Sharp Drop in Geopolitical Risk, Easing Energy Prices and Inflation Expectations
Over the past two trading sessions, the most crucial factor supporting the gold market has been the prospect of an initial agreement between the United States and Iran to end the Middle East conflict. Announced by U.S. President Trump, this agreement extends a fragile April ceasefire by 60 days and, critically, reopens the Strait of Hormuz—which has been effectively blockaded by Iran since U.S.-Israeli strikes in February. This vital waterway handles about one-fifth of global oil and liquefied natural gas trade, making its reopening highly significant for energy supply chains.
Details of the agreement are emerging: President Trump emphasized the text explicitly prevents Tehran from obtaining nuclear weapons, allows Iran to immediately sell oil upon signing, and grants access to banking, transport, and insurance services, subject to strict conditions including destroying enriched materials and non-interference with freedom of navigation. Iran views this as a major step toward normalizing business. The two sides will formally sign in Switzerland on Friday and immediately begin the next phase of negotiations, focusing on thorny issues like Iran's nuclear program. While conflict between Israel and Hezbollah in Lebanon remains uncertain and a final comprehensive deal is not yet in place, the significant near-term easing of geopolitical tensions is enough to shift the market narrative.
David Meger, head of metal trading at High Ridge Futures, noted directly that this agreement prospect has triggered a chain reaction: lower short-term rates, falling energy prices, and reduced likelihood of a later Fed rate hike. Brent crude futures consequently fell below $80 per barrel, hitting their lowest level since early March, after plunging nearly 5% on Monday and falling another 5% on Tuesday. The drop in oil prices has eased inflation concerns. Although analysts warn that import prices are still rising (up 1.9% month-on-month in May) and inflation remains well above the Fed's 2% target, the direct downward pressure on energy costs has provided strong support for gold. Gold no longer relies solely on safe-haven demand; its inflation-hedge properties also shine against a backdrop of stabilizing macro conditions.
Fed Decision Looms Wednesday: New Chair Warsh's Debut and "Dot Plot" Suspense
Market attention is firmly fixed on this week's Federal Reserve interest rate decision, the first meeting under new Chair Kevin Warsh. The Fed is widely expected to hold rates steady in the 3.50%-3.75% range. However, investors are more focused on whether the policy statement will remove language suggesting an easing bias and on Warsh's remarks at the press conference. The CME FedWatch Tool shows the probability of a December rate hike has fallen from around 70% last week to about 60%, with federal funds futures pricing indicating a similar 59% chance.
Warsh's stance on reforming Fed communication is the biggest uncertainty. He has publicly criticized the "dot plot" and forward guidance, arguing these tools limit policy flexibility and could lead the Fed to repeat past mistakes like calling inflation "transitory." Most market observers expect he may not submit his own dot projection this time, breaking a roughly 14-year tradition. Experts like Yale Professor Bill English suggest this could be Warsh's first step toward fundamental institutional change, but it might also spark market speculation about a hawkish shift within the Fed or create a communication vacuum.
Institutions such as BNP Paribas point out that even if oil prices fall to pre-conflict levels, it will be difficult to fully contain inflation pressures, and the neutral rate may have shifted higher. The 10-year TIPS breakeven rate is currently around 2.299%, suggesting the market expects average inflation over the next decade to be about 2.3%. The coexistence of a weak housing market (May housing starts plunged 15.4%) and rising import prices further highlights the complexity of the Fed's decision-making. Warsh's rejection of forward guidance could make this meeting a major test of communication strategy; any hawkish signals will influence gold's short-term volatility.
Dollar Weakness and Bond Market Retreat: Gold Bulls Gain Macro Support
In sync with gold's rise, the U.S. Dollar Index fell 0.12% to 99.55 on Tuesday. U.S. Treasury yields also declined, with the 10-year yield down 4.5 basis points to 4.424% and the two-year yield falling to 4.047%. A 20-year Treasury auction saw solid demand, but the overall bond market reflected investor adjustments to the easing of geopolitical tensions and Fed policy expectations.
Although concerns about elevated energy prices persist and the subsequent negotiations on Iran's nuclear program and regional proxy support remain uncertain, the clear improvement in near-term risk appetite has significantly weakened the dollar's safe-haven appeal. Gold thus gains a dual driver: while the geopolitical risk premium declines, lower real rate expectations further benefit non-yielding assets.
Outlook: Bullish Gold Thesis Remains, But Watch for Agreement Execution Risks
In summary, this gold price rebound results from a confluence of fundamental and technical factors. Spot gold's four consecutive days of gains show renewed confidence among bulls. The short-term optimism from the U.S.-Iran deal has provided a catalyst for the rise. However, the agreement's temporary nature (only a 60-day extension), the persistence of the Israel-Hezbollah conflict, and the difficulty of the next-phase nuclear talks all mean geopolitical risks are not entirely eliminated. It will take months for oil supply to fully normalize, and inflation pressures will not disappear overnight.
The communication changes and policy signals from the new Fed Chair will be the dominant variable for market volatility going forward. If Warsh's remarks lean toward caution or data-dependence, gold's safe-haven premium could persist. Conversely, a more hawkish stance could bring near-term downward pressure. But from a medium-to-long-term perspective, the global environment of uncertainty, geopolitical realignment, and potential monetary policy flexibility continue to form a solid foundation for gold.
Investors should closely monitor the details of Wednesday's Fed decision and Chair Warsh's press conference, the formal U.S.-Iran signing progress on Friday, and developments in the crude oil market.
(Spot Gold Daily Chart, Source: YiHuiTong) At 7:00 Beijing time, spot gold is trading at $4,334.88 per ounce.
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