Gold Rises on Middle East Peace Hopes

Gold Rises on Middle East Peace Hopes

Gold prices increased by over 1% on Monday, May 25, 2026, as prospects of a peace agreement to conclude the Iran war led to a decline in the U.S. dollar and oil prices. Spot gold advanced 1.1% to $4,559.69 per ounce by 0931 GMT, while U.S. gold futures for June delivery gained 0.9% to $4,561.30. This movement occurred despite U.S. markets being closed for the Memorial Day holiday.

The rise in gold reflects investor anticipation that reduced geopolitical tensions will alleviate inflation concerns and temper expectations for prolonged high interest rates. Oil prices fell below $100 a barrel, reaching two-week lows, and the dollar weakened to a one-week low. This shift in market sentiment is driven by the belief that lower oil prices will influence the Federal Reserve's monetary policy, potentially reducing the need for aggressive rate hikes.

Prior to the Iran war, economists had largely predicted two U.S. interest rate cuts for the year. However, the conflict, which began in late February, had fueled inflation concerns and led to expectations of higher U.S. interest rates, causing gold to fall by approximately 14%. Traders now assign a 40% probability to the Federal Reserve raising U.S. interest rates by 25 basis points in December, a significant change from pre-conflict expectations.