Gold prices rose on Monday as oil prices fell sharply and the US dollar weakened. The moves followed President Donald Trump’s decision to delay further military action against Iran while the United States pursued a possible agreement over Tehran’s nuclear programme and the reopening of the Strait of Hormuz.
Spot gold increased 0.3% to US$4,052.96 an ounce, while US gold futures rose 0.2% to US$4,051.70. Gold had already gained about 1% in July, marking its first monthly increase in five months.
Oil prices dropped by more than US$4 a barrel as markets reduced the immediate risk of further disruption in the Middle East. Trump said talks with Iran were expected on Monday, although Iran said no discussions with the United States were taking place.
Energy costs influence inflation. Lower oil prices can reduce pressure on central banks to keep interest rates high. That is supportive for gold because the metal does not pay interest and tends to become more attractive when expected returns on cash and bonds fall.
The US dollar also weakened to its lowest level since mid-June after authorities acted to support the Japanese yen. A weaker dollar makes gold cheaper for buyers using other currencies, which can strengthen demand. Lower yields on 10-year US Treasury bonds added further support.
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