Gold climbs as investors evaluate prospects for US-Iran deal

Prices of the black stuff surged more than 1% on Monday, aided by a weaker dollar and falling oil prices as investors considered the chances of a breakthrough in U.S.-Iran peace discussions.

Spot gold gained 1.1% to $4,559.29 per ounce as of 0359 GMT. U.S. gold futures for June delivery rose 0.8% to $4,560.30.

The dollar declined, making greenback-priced bullion more cheap for holders of other currencies.Trump has stoked market hopes of some type of deal with Iran that may see the Strait of Hormuz reopened. “The prospect has weighed on oil prices and, by extension, given gold a welcome lift from an inflation perspective,” said Tim Waterer, chief market analyst at KCM Trade.

U.S. President Donald Trump said on Sunday he had told his representatives not to rush into any deal with Iran, as his administration played down expectations of an imminent breakthrough in the three-month-old battle.

Trump declared a day earlier that Washington and Iran had “largely negotiated” a memorandum of understanding for a peace accord that would reopen the Strait of Hormuz.

Oil prices dropped to two-week lows on Monday on hope that the U.S. and Iran were moving closer towards a peace accord even as both countries remained at odds over critical issues.

Oil prices affect inflation expectations. Higher crude can stoke inflation and keep rates higher for longer. Gold is seen as a hedge against inflation, although higher rates tend to weigh on the non-yielding metal.

Kevin Warsh was sworn in Friday as chair of the U.S. Federal Reserve at a critical time for an American economy buffeted by increasing gasoline costs that are feeding inflation and eating into consumer confidence because of the war with Iran.

Silver was up 2.8% at $77.61 an ounce, platinum gained 1.9% to $1,958.35 and palladium climbed 2.3% to $1,379.31.