Gold gains as US-Iran fighting pauses, oil tumbles over 4%

Gold prices rose on Monday as a pause in Middle East hostilities sent oil prices sharply lower and eased some inflation concerns, while investors awaited the US Federal Reserve's policy decision later this week.

Spot gold gained 0.9% to trade at $4,087.79 per ounce by 0421 GMT. US gold futures rose 0.5% to $4,089.90.

According to Tim Waterer, chief market analyst at KCM Trade, gold benefited directly from the combined moves in oil and the US dollar on Monday. The US dollar index fell 0.3%, making dollar-priced metals cheaper for holders of other currencies.

The rally followed reports that Iran will halt its own attacks as long as the United States maintains its pause, a senior Iranian official told Reuters on Sunday. The US had suspended its bombing campaign after President Donald Trump's advisers warned him that available targets were running out and raised concerns about depleting American military stockpiles.

Oil prices fell more than 4% on the day. Since the conflict escalated earlier this year, rising oil prices have stoked inflation fears and expectations of further central bank rate hikes, which in turn weighed on gold. Despite being a traditional inflation hedge, gold tends to lose appeal when higher interest rates raise the opportunity cost of holding a non-yielding asset.

Waterer said he remains constructively bullish on gold over the longer term, though its near-term direction will likely stay closely tied to oil prices and remain volatile, shaped heavily by geopolitical developments until a more durable peace is established.

Markets are now focused on the Fed's meeting scheduled for July 28-29, where policymakers are widely expected to leave interest rates unchanged. According to the CME FedWatch Tool, traders are pricing in a 76% probability of a rate cut in September.

Among other precious metals, spot silver rose 1.7% to $59.16 per ounce, platinum climbed 1.5% to $1,612.04, and palladium gained 1.6% to $1,263.73.