U.S. Treasury yields fall as oil prices plunge on Iran de-escalation hopes

Gold prices climbed on Monday as oil prices dropped following U.S. President Donald Trump's decision to avoid launching new attacks on Iran, aiming for a quick deal. This eased worries about potential inflation and higher interest rates. Spot gold increased by 0.7% to $4,068.54 per ounce. U.S. gold futures also rose 0.9% to $4,066.60.

The U.S. dollar faced pressure after authorities stepped in to stabilize the foreign exchange market, particularly the yen, making dollar-priced bullion more affordable for international buyers.

Tim Waterer, chief market analyst at KCM Trade, noted that gold has started the week positively, although gains are modest due to uncertainties in oil markets and the Middle East, making the metal a cautiously optimistic choice. Trump indicated that talks with Iran would occur on Monday, but did not set a deadline for an agreement.

Oil prices plummeted more than 5%. Gold has faced pressure since the onset of the U.S.-Iran conflict, as a war-fueled inflation surge might prompt central banks to raise interest rates. While gold is typically seen as a hedge against inflation, its allure wanes in a high-interest-rate environment since it does not generate interest.

Market participants will also pay attention to a series of U.S. job reports due this week, including job openings data, the ADP employment report, weekly jobless claims, and the nonfarm payrolls report. Any further Middle East escalation that drives oil prices up, or a strong nonfarm payrolls print supporting the September rate-hike odds, could cap gold's upside, according to Waterer.

Three U.S. Federal Reserve officials who opposed a rate hike at the previous policy meeting raised concerns on Friday that without an immediate increase in short-term borrowing costs, inflation would remain above the Fed's 2% target. Analysts at Standard Chartered suggested in a note that they still anticipate gold to find short-term support before recovering with seasonal buying. Spot silver increased by 1.4% to $58.46, platinum rose 0.5% to $1,650.63, and palladium jumped 1.6% to $1,293.50.