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Gold prices rise as oil prices fall and the dollar is bolstered by hawkish Fed

Gold prices rose on Thursday, as a lower oil price following the?U.S. Iran ceasefire agreement countered pressures from a stronger US dollar and hawkish Federal Reserve language.

Gold spot was up 0.2% to $4,264.67 an ounce by 0913 GMT following a 1.7% drop on Wednesday. U.S. Gold Futures dropped 2.2% to $4285.00.

Oil prices dropped after the U.S. signed an interim deal with Iran that would 'end their conflict,' reopen Strait of Hormuz, and lift U.S. sanctions against Tehran oil. This boosted the outlook for oil supplies.

Han Tan, Bybit's chief market analyst, says that gold is on the rise, as bulls are looking to squeeze even more out of the U.S.Iran interim peace deal. However, the upside potential remains limited by market expectations of at least one Fed interest rate hike before the end of the year.

Tan continued, "The hawkish Fed will leave'spot gold' with a greater bias to dip back into the sub-$4,000 water rather than reclaiming $5,000 in the second half 2026."

The Fed kept interest rates unchanged on Wednesday. However, policymakers are expecting a rise in borrowing costs by the end of this year due to growing concerns over inflation that is above the 2% target set by the U.S. Central Bank. Kevin Warsh, Fed Chair, announced at a press conference that he would be launching a number of task forces in order to look more closely at central bank operations.

According to CME FedWatch Tool the markets have now priced in an approximately?84% chance of a U.S. interest rate hike in December.

In a high interest rate environment, gold is less appealing because it has no yield.

The U.S. Dollar Index rose 0.5%, adding?pressure to prices. The dollar index is stronger, making metals denominated in dollars more expensive to holders of other currencies.

ANZ stated in a report that "physical demand, particularly from China, 'and central bank purchases are underpinning market."

Silver spot rose by 0.2% per ounce to $68.10, while platinum dropped 1.2% to $1715.60, and palladium fell by 1.9% to 1,288.07.

(source: Reuters)