Quick overview

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The bullion asset experienced a significant decline in overnight trading after US President Donald Trump unexpectedly declared that Israel and Iran had reached a full ceasefire agreement. Gold prices dropped 2% to $3,300 before rising to about $3,351 per ounce.

Investors have flocked to the yellow metal, which has increased by more than 25% since the year began, as a haven asset in the face of geopolitical turmoil. Because of the economic repercussions of trade tensions, investors favored bullion over riskier assets, and the metal’s success this year was bolstered by continuous central bank purchases. The yellow metal fell from recent highs after news of the ceasefire between Israel and Iran. A truce between Iran and Israel was established following four waves of Iranian attacks on Israeli-occupied territories.

The de-escalation of tensions in the Middle East is the primary factor influencing gold prices. Haven assets are no longer in high demand.

Fed Chair Powell stated the US Fed will wait and observe how the economy develops before determining whether to lower its key interest rate, restating his position that policymakers shouldn’t react hastily.

The Fed Chair making less dovish comments could help keep the gold market’s losses in check shortly. Money markets have fully priced in two Fed rate cuts by the end of 2025, with a September first cut being much more likely than a July one. However, expectations of a July reduction have increased since last week.