Gold extends recovery as US-Iran ceasefire deal nears 60-day extension

Gold extended its recovery above $2,350 an ounce in late May trading as growing expectations of a US-Iran ceasefire deal reduced safe-haven demand for the precious metal, with negotiators reaching a tentative 60-day memorandum of understanding to extend the truce and launch nuclear talks.

"The tentative framework addresses the Strait of Hormuz reopening and a path to negotiate Iran's enriched uranium stockpile, which removes a significant geopolitical risk premium from gold," said Elena Fischer, geopolitical risk analyst at Edgen. "If finalized, we could see gold test support near $2,300 as risk-on sentiment returns."

The proposed agreement, negotiated with mediation from Pakistan, Oman and Qatar, would require Iran to remove all naval mines from the Strait of Hormuz within 30 days and cease imposing tolls on commercial vessels, according to a US official familiar with the matter. In return, the US would gradually lift its naval blockade on Iranian ports and relax sanctions to allow Iran to sell more oil. The strait handles about a fifth of the world's traded oil and natural gas, and its effective closure during the three-month conflict sent crude prices surging. US Treasury Secretary Scott Bessent predicted Thursday that oil costs could "come down very quickly" once a deal is finalized.

The nuclear component remains the most contentious. Iran holds 440.9 kilograms (972 pounds) of uranium enriched to 60% purity — a short technical step from weapons-grade levels of 90%, according to the International Atomic Energy Agency. Vice President JD Vance confirmed Thursday evening that negotiators were still working through "a couple of issues on the nuclear stuff, the highly enriched stockpile, and also the question of enrichment." Trump has not yet approved the agreement, and Iran's Tasnim news agency, citing a source close to the negotiating team, denied that any memorandum had been finalized.

Strait of Hormuz remains the flashpoint

The tentative deal comes as both sides continue to trade strikes. US Central Command reported intercepting five Iranian one-way attack drones threatening commercial shipping in the strait on May 28 and striking an Iranian drone launch site in Bandar Abbas. Iran's Islamic Revolutionary Guards Corps responded by seizing two vessels and issuing warnings to four others attempting to transit without Iranian permission, state media reported. Kuwait also intercepted missiles fired from Iran, which US Central Command called an "egregious ceasefire violation."

The US Treasury Department on May 27 sanctioned the newly created Persian Gulf Strait Authority, which Iran established to formalize its control over the waterway and collect transit fees. Bessent warned that any actor cooperating with the authority could face sanctions, including Oman, which Iran had reportedly approached about jointly managing the toll system.

Gold's trajectory hinges on deal finalization

Gold had rallied sharply after the US-Iran conflict erupted in late February, with the precious metal breaching $2,500 as investors sought refuge from the geopolitical shock and surging oil prices. The tentative ceasefire framework has begun to unwind some of those gains. If Trump approves the memorandum and the 60-day extension holds, analysts expect gold to face further headwinds as risk appetite improves and the dollar strengthens on reduced geopolitical uncertainty.

However, the path remains uncertain. Iran's Supreme Leader Mojtaba Khamenei has not publicly endorsed the terms, and IRGC Commander Major General Ahmad Vahidi's inner circle continues to dominate Iranian decision-making, according to the Institute for the Study of War. Iran's parliament speaker Mohammad Bagher Ghalibaf, who leads the negotiating delegation, was re-elected with 235 of 285 votes on May 25, suggesting continuity in Tehran's negotiating stance.

The last time a major Middle East conflict de-escalated through a negotiated framework — the 2023 Israel-Hamas truce — gold fell roughly 6% over the subsequent 60 days as the geopolitical risk premium dissipated. A similar move from current levels would put XAU/USD near $2,200.

This article is for informational purposes only and does not constitute investment advice.