Gold prices rose on Tuesday, buoyed by a softer U.S. dollar, as markets gauged hopes for a permanent ceasefire between the U.S. and Iran.
Spot gold edged up 0.7% to $4,773.34 an ounce by 05:49 ET (09:49 GMT), while gold futures added 0.7% to $4,800.12/oz. Bullion was supported by weakness in the dollar, with markets looking to some de-escalation in the Iran war despite an ongoing U.S. naval blockade of Iranian ports. Softness in the greenback can make gold more attractive to overseas buyers, possibly boosting demand.
While gold is typically viewed as a bulwark against geopolitical strife, investors have broadly looked to the dollar for safety during the Middle East conflict. The U.S. is viewed as a net energy exporter, which could help insulate the American economy from disruptions to oil flows from the Persian Gulf. Signs of de-escalation between the U.S. and Iran, as a result, have recently weighed on the dollar and bolstered gold.
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Washington and Tehran have continued to engaged with one another and there has been some forward motion toward a permanent ceasefire deal, Reuters reported.
U.S. President Donald Trump has also noted that the White House had been contacted by Iranian officials who would like to "make a deal," adding that Iran will not have a nuclear weapon. Washington has reportedly demanded that Iran agree not to enrich uranium, a key part of the process of building a nuclear weapon, for 20 years.
Meanwhile, Pakistan, which has emerged as a key mediator between the U.S. and Iran, has offered to host a second round of discussions prior to the end of the ongoing two-week ceasefire, according to reports. The first talks were held in Islamabad last weekend.
Elsewhere, Israel and Lebanon are due to begin direct peace talks in Washington on Tuesday. Air attacks by Israel on targets in Iran-aligned Hezbollah targets in Lebanon have been a key sticking point threatening the fragile halt to hostilities between the U.S. and Iran.
U.S. Secretary of State Marco Rubio will take part in the discussions between Israel and Lebanon, the WSJ said, quoting a State Department official.
Oil prices dipped back below $100 a barrel amid optimism for a possible deal to end the fighting in the Middle East. Brent crude futures, the global benchmark, were last down by 0.9% to $98.47 a barrel, while U.S. West Texas Intermediate crude futures declined by 2.0% to $97.07 a barrel.
But crude prices remain well above pre-war levels. The energy shock has fueled concerns over a spike in inflationary pressures in countries around the world, denting expectations for central bank interest rate reductions. Gold tends to underperform in elevated rate environments.
Traders will have the chance to parse through U.S. producer price index data later today. The numbers will be closely watched for signs of an energy-fueled inflation bump in March, especially after data last week showed that consumer price growth accelerated
