Middle East Crisis Temporarily Over? Expectations for US Fed Interest Rate Cut Reignite, Gold Approaches $4,900

Gold prices extended their gains further on Friday, primarily driven by a weaker US dollar and a statement from Iran's foreign minister that the Strait of Hormuz would remain open during the ceasefire. This news pushed oil prices lower and eased some market concerns about inflation.

During Friday's US trading session, spot gold rose nearly 2%, briefly approaching $4,900.

Iranian Foreign Minister Araghchi posted that vessels passing through the strait would follow coordinated routes already published by Iran's Ports and Maritime Organization. US President Trump said he believed a deal to end the Iran war would be reached "soon," although the specific timetable remained unknown.

Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, said: "The reopening of the strait is a pivotal event. With oil prices under pressure, this is expected to ease inflation concerns and reignite expectations for interest rate cuts — all of which is genuinely positive news for gold."

He added that gold prices could return above $5,000 per ounce in the near term.

Following the comments about the opening of the Strait of Hormuz, the US dollar and oil prices extended their declines. A weaker dollar made gold more attractive to buyers holding other currencies.

The move also boosted market expectations for a US Fed interest rate cut before the end of the year. Traders currently see roughly a 60% probability that the US Fed will cut its benchmark interest rate before December.

Gold prices had briefly declined after the US and Israel launched strikes on Iran in late February, as surging energy prices intensified inflation concerns, prompting markets to scale back expectations for interest rate cuts. Since gold itself generates no interest, it typically loses some of its appeal when borrowing costs stay high.

Meanwhile, according to trade sources, Indian banks have suspended placing gold and silver orders with ex-China suppliers as the government has yet to issue official documents authorizing imports, leaving several metric tons of precious metals stranded at customs.