Peace talks usually crush gold, but not this time. Spot gold pushed past $4,500 Monday even as the U.S. and Iran inched closer to ending their three-month-old war, with the reason being the side effects, not the deal itself.
The dollar slid to one-week lows as oil prices dropped to two-week lows. Both of those moves help gold, but for different reasons.
When the dollar weakens, gold gets cheaper for buyers using other currencies, which lifts demand. When oil cools, the inflation outlook softens - and that matters because high inflation usually pushes interest rates higher, while gold doesn't pay interest.
Put them together, and you get a 1.1% jump to $4,559.07 an ounce.
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Trump said on Saturday the U.S. and Iran had "largely negotiated" a framework that would reopen the Strait of Hormuz, the chokepoint where roughly a fifth of global oil and gas used to flow. Iran's foreign ministry walked some of that back Monday, and Rubio said the U.S. would explore "alternatives" if diplomacy stalled.
Markets read the back-and-forth as progress anyway, with the dollar's weakness and oil's drop both reading as peace bets.
Gold typically isn't the asset that benefits when wars wind down, but this time it's tagging along on the same trade - even as the Fed's main inflation gauge keeps heading toward 4%.
Gold wasn't the only metal moving, with spot silver climbing 3.1% to $77.79 per ounce, more than double gold's percentage gain. Platinum rose 2.3% to $1,966.59, while palladium added 2.7% to $1,384.70.
Silver tends to move further than gold in both directions, so when investors feel safer about taking on risk, silver often rallies harder. That's the read on Monday's move.
A weaker dollar also gives all four metals a boost, since they're priced in U.S. currency.
Kevin Warsh was sworn in as Federal Reserve chair Friday, inheriting an economy where gas prices linked to the Iran war keep pushing inflation up and consumer sentiment down. If a peace deal lands, his job gets easier.
If it doesn't, gold's rally probably keeps going - for the wrong reasons. Travel and food costs are already running hot heading into Memorial Day, with inflation at 3.8%.
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