Gold closes higher on hopes for Middle East de-escalation

Gold and silver closed sharply higher as optimism over potential US-Iran diplomatic progress boosted sentiment

Gold and silver prices ended Tuesday higher, supported by hopes that diplomatic progress between the US and Iran could ease energy price pressures and reduce expectations of further monetary tightening by the US Federal Reserve.

The gains came after a senior Iranian official told Reuters that Tehran had received a proposal from mediators for a 10-day ceasefire aimed at preserving a temporary agreement.

Amid cautious diplomatic optimism, investors are awaiting the Federal Reserve's interest rate decision and the post-meeting press conference by Fed Chair Kevin Warsh following next week's policy meeting.

According to the CME FedWatch Tool, markets are currently pricing in a 68% probability of a rate hike in September after the Fed is widely expected to leave rates unchanged at its upcoming meeting.