Gold prices experienced a significant surge on Monday, climbing more than 1% as market sentiment shifted following signs of potential progress in diplomatic negotiations between the United States and Iran. The prospect of a peace deal, which could potentially reopen the Strait of Hormuz, has led to a cooling in oil prices and a weakening of the U.S. dollar, both of which have provided a boost to the precious metal.

Spot gold reached $4,559.07 per ounce, while U.S. gold futures for June delivery saw a 0.8% increase to $4,559.80. Investors appear to be focusing on recent statements suggesting that Washington and Tehran have made substantial progress on a memorandum of understanding, despite ongoing rhetoric from U.S. leadership regarding the urgency of a final agreement. Secretary of State Marco Rubio noted that the administration remains committed to securing a favorable outcome or pursuing alternative measures.

The decline in oil prices is particularly significant for the gold market, as elevated crude costs are a primary driver of inflation and high interest rates. Because gold is a non-yielding asset, it typically faces pressure in high-interest-rate environments; however, the current easing of inflation expectations has made bullion more attractive. Furthermore, the dollar’s retreat to one-week lows has increased the purchasing power of international investors holding other currencies.

This market shift occurs during a critical transition for the U.S. economy, marked by the recent swearing-in of Kevin Warsh as chair of the Federal Reserve. As the central bank navigates the impact of energy-linked inflation on consumer sentiment, other precious metals have also seen gains. Silver climbed 3.1% to $77.79 per ounce, while platinum and palladium rose by 2.3% and 2.7%, respectively.