Gold prices surged on Monday, with spot gold rallying 3.24% to $4,356 per ounce, extending its winning streak to a third day, according to Business-Today. The rally was fueled by a preliminary Memorandum of Understanding (MoU) between the US and Iran to end the Middle East conflict, which sent crude oil prices tumbling and eased Treasury yields and the US Dollar.
Geopolitical Catalyst: US-Iran MoU
The tentative deal, set to be signed on June 19 in Geneva, Switzerland, includes several key provisions:
- Iran will open the Strait of Hormuz within 30 days as the US lifts its blockade.
- Transit through the Strait will be free for the first 60 days; after that, Iran plans to charge for safety, navigation, environmental and insurance services, according to Iran's news agency Fars.
- Iran has proposed a $300 billion reconstruction fund and seeks the release of billions in frozen assets and the lifting of all primary and secondary sanctions during the ceasefire period.
- Israel is opposed to the deal, as it was concluded without its participation. Saudi Arabia has expressed reservations against Iran generating revenue from vessel transit.
- US President Trump stated that transit through the Strait will be toll-free in the long term, while US VP Vance said it will be toll-free long term.
Supply and Demand Dynamics
The MoU's impact on crude oil was immediate: Brent crude prices sank 5% to $82 per barrel, the lowest since March 10, according to Business-Today. Lower oil prices reduce inflationary pressures and diminish the appeal of gold as a hedge, but in the near term, the dollar weakness from falling oil supported gold. Spot gold had ended the previous week with a steep loss of 2.51% at $4,219. The preliminary deal, however, reversed that decline. Critics, per the report, do not see the deal bringing long-term stability, and Iranian negotiators may face hurdles selling the deal to hardliners at home.
Macroeconomic Factors
The US Dollar Index fell for a third consecutive day, hovering around 99.58, down 0.15% on June 15. Two-year US Treasury yields fell 1% to 4.03%, while ten-year yields dropped 3 basis points to 4.45%, as investors pared back rate hike expectations. The Indian Rupee rallied nearly 0.8% against the dollar to 94.30. US economic data showed weakness: Empire manufacturing came in at 5.7 versus an estimate of 13.7, industrial production stagnated, and the NAHB Housing Index remained at 35. Implied overnight rates reflected a slight easing in rate hike expectations, with the first full rate hike timeline shifted from January to March 2026.
Outlook and Key Events
Gold prices may rise in the near-term as oil prices ease but the US Federal Reserve’s meeting is an important thing to watch, said Praveen Singh, Head of Currencies and Commodities at Mirae Asset ShareKhan.
The Fed meeting is now a key focus. Additionally, the formal signing of the US-Iran MoU on June 19 will be closely watched for further details on the agreement's terms, which are likely to be published after the signing. The outcome of negotiations could determine whether gold continues its rally or faces headwinds from a potential resolution of Middle East tensions.
| Period | Price ($/oz) | Change |
|---|---|---|
| June 15 (daily close) | 4,356 | +3.24% |
| Week ending June 12 | 4,219 | -2.51% |
Sources:
