Gold prices surged over 1% on Monday, supported by a weaker US dollar and softer crude oil prices, as investors closely monitored progress in peace negotiations between the United States and Iran. Spot gold advanced 1.4% to $4,570.88 per ounce by 0045 GMT, while US gold futures for June delivery gained 1.1% to reach $4,572.90. The gains followed a weekend statement from US President Donald Trump, who said Washington and Tehran had “largely negotiated” a memorandum of understanding related to a potential peace agreement aimed at reducing tensions in the Gulf region and reopening the Strait of Hormuz.
The decline in the dollar made gold priced in the greenback cheaper for buyers using other currencies, supporting demand for bullion. Trump said on Sunday that he had instructed his representatives not to rush negotiations with Iran, as his administration attempted to tone down expectations of an immediate breakthrough in the conflict that has continued for the past three months. A day earlier, Trump had stated that Washington and Tehran had “largely negotiated” a memorandum of understanding related to a potential peace agreement that could reopen the Strait of Hormuz.
Oil prices fell to their lowest levels in two weeks on Monday amid optimism that the United States and Iran were moving closer to a peace deal, although major differences between the two sides still remain unresolved. Brent crude futures dropped $4.71, or 4.55%, to $98.83 a barrel, while US West Texas Intermediate crude declined $4.57, or 4.73%, to $92.03 a barrel. Earlier in the session, both benchmarks touched their weakest levels since May 7. Last week, US crude prices slumped more than 8%, while Brent lost over 5%, after Trump said he had cancelled imminent airstrikes against Iran to allow more time for diplomacy. Despite the recent pullback, oil prices are still up more than 30% since the US and Israel launched attacks on Iran on February 28.
Analysts caution that even with a deal, full normalization could take months, with potential impacts extending for years. Iran has effectively enforced a blockade in the Strait of Hormuz since early March, requiring ships to obtain clearance before passing through the route or risk being targeted. The restrictions were imposed after US and Israeli strikes killed Iran’s Supreme Leader Ayatollah Ali Khamenei along with several senior leaders. The Strait of Hormuz remains one of the world’s most critical oil chokepoints, with roughly 20% of global oil supply moving through the passage before the war. Iran’s blockade has sharply reduced crude exports from the Middle East, leading to what has been described as the largest supply disruption in history.
Even if a deal is reached, analysts believe it could take several months for oil shipments through the strait to fully normalise and for damaged energy infrastructure to be repaired. Earlier this month, Saudi Aramco CEO Amin Nasser warned that disruptions in Hormuz could delay stability in global oil markets until 2027, with nearly 100 million barrels of oil supply per week potentially impacted. Saudi Aramco is the world’s largest oil producer. Meanwhile, Morgan Stanley said the oil market was in “a race against time,” cautioning that the factors preventing crude prices from rising further may weaken if the Strait of Hormuz remains shut through June.
In India, gold futures ended the previous week with marginal gains at around Rs 1.58 lakh per 10 grams, while silver futures closed slightly lower at Rs 2.71 lakh per kilogram. Pranav Mer, Vice President of EBG - Commodity & Currency Research at JM Financial Services, said gold is expected to remain largely sideways this week, while silver may continue to show strength as market attention stays focused on US-Iran peace discussions. Mer added that gold prices remained largely range-bound over the past few sessions and ended the week with slight losses due to the absence of strong directional triggers from either the economic front or developments related to the US-Iran conflict. He noted that crude oil prices continued to remain volatile because of inconsistent and frequently changing statements from both US and Iranian officials.
Domestic commodity futures markets will remain shut during the morning trading session on Thursday on account of Bakri Id. Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, said gold traded within a narrow range last week and recorded modest gains of nearly 0.40% on the MCX, settling close to Rs 1,58,670 per 10 grams. He noted that crude oil witnessed sharp profit booking during the week, with prices correcting nearly 7% from recent highs, which helped ease some global inflation concerns. Trivedi also pointed out that the rupee recovered from weaker levels near 97 against the US dollar to strengthen around 95.70, limiting the upside in domestic gold prices despite relatively stable global bullion trends. In international markets, Comex gold futures declined 1% for the week to close at $4,523.2 per ounce, while silver futures fell almost 2% to settle at $76.20 per ounce.
