FX.co ★ Gold Rises as Markets Track US-Iran Diplomacy

Gold climbed more than 1% to $4,070 an ounce on Tuesday as investors assessed diplomatic efforts to ease tensions between the US and Iran and their implications for oil prices, inflation, and the Federal Reserve’s interest-rate path.

Reports indicated that mediators are working to bring Washington and Tehran back to the negotiating table, with talks reportedly including a possible 10-day truce designed to secure shipping routes through the Strait of Hormuz. The latest flare-up in the conflict has driven oil prices to their highest level in more than a month, stoking concerns that rising energy costs could intensify inflationary pressures.

In response, an increasing number of US policymakers have argued that interest rates may need to stay higher for longer—or even rise further—to keep inflation in check. Although the Fed is widely expected to leave rates unchanged at next week’s meeting, futures markets are now pricing in better than a 60% chance of a rate hike in September.