Brief Gold Market Overview

Gold rose mainly because oil prices fell sharply after the United States and Iran paused their military operations over the weekend. Iran said it would also stop its attacks as long as the U.S. did the same. This raised hopes that the conflict could ease and that oil shipments through the Strait of Hormuz could return to normal.

The pause in fighting reduced fears of further disruptions to oil supplies, and Brent crude fell sharply as a result. Although Brent had closed at around $98 per barrel in the previous session, it opened at around $88 and fell as low as $85 during Monday's trading session.

Lower oil prices reduced concerns that higher energy costs would push inflation higher, which in turn reduced expectations that interest rates would stay high for longer. That made gold more attractive, since the cost of holding a non-yielding asset became lower, supporting gold prices.

The weaker U.S. dollar also supported gold. The dollar index fell by 0.1%, making gold cheaper for buyers using other currencies.

However, gold's recovery was limited by continued uncertainty over the U.S.-Iran conflict and expectations for Federal Reserve policy. Markets largely expect the Fed to keep interest rates unchanged at this week's meeting, but traders still see an 82% chance of a rate hike in September.

Investors are also waiting for the U.S. Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, which is due on Thursday. The data could influence expectations for future interest rates and, in turn, affect gold prices.