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Oil prices fall as US-Iran optimism about peace lowers gold prices

Gold prices rose on Monday, after recovering from a?low? of over a week in the previous session. Progress in U.S. Iran peace talks helped to stabilize oil prices, and eased inflation fears.

Gold spot rose 0.5%, to $4.182.39 an ounce at 1:50 pm. ET (1750 GMT). On Friday, prices reached their lowest level since June 11.

U.S. Gold Futures for August Delivery? Settled 1% Lower at $4,202.7 per ounce.

Ole Hansen, analyst at Saxo Bank, said that energy prices would remain the key driver of precious metals in the short term.

We're watching the bumpy discussions in Switzerland between?U.S. Iran and the United States are still on track to reach a deal which would bring new barrels of oil onto the market, Hansen said. This would put pressure on crude prices as well as help gold.

JD 'Vance, the U.S. vice president, said that talks in Switzerland with Iranian officials had "laid a good foundation" for an eventual peace deal despite tensions surrounding the Strait of Hormuz.

Brent crude futures dropped more than 3% following the announcement.

According to the CME FedWatch Tool, traders see an 89% probability of a rate increase in December. This is up from 61% prior to the Federal Reserve meeting last week.

Nine out of 19 Fed policymakers think they'll need to increase the?policy interest rate this year.

Gold, despite its reputation as an inflation hedge, tends to lose appeal when interest rates increase, as it becomes less appealing relative to other investments that pay interest.

Bank of America stated in a note published on Friday that the $6,000 per ounce gold target is 'unlikely', since the market would have to price rate increases into their prices to reach such levels.

The original premise that underpinned the bank's bullish gold call -- an unorthodox U.S. Macro Policy -- remains intact, according to the statement.

(Reporting by Sukanya Mitra and Ashitha Shivaprasad in Bengaluru Editing by Leroy Leo and Vijay Kishore) (Reporting and editing by Leroy Leo, Vijay Kishore and Ashitha shivaprasad from Bengaluru)

(source: Reuters)