The US Dollar Index stays near 13-month highs, while Gold holds around $4,200 as US–Iran peace optimism offsets the Fed’s hawkish stance.

United States Dollar Index remains close to 13-month highs

The United States Dollar Index stays near a 13-month peak around 101.13, supported by hawkish expectations surrounding the Federal Reserve policy outlook. Meanwhile, US Vice President JD Vance stated that negotiations have achieved “great progress,” despite lingering tensions behind the scenes.

The United States Dollar Index (DXY), which tracks the US Dollar against six major currencies, traded steadily near the 101.00 mark during Tuesday’s Asian session after posting modest gains in the previous session.

The index continues to hover close to its 13-month high of 101.13, reached on June 19, as markets maintain a hawkish view on the Federal Reserve policy outlook. The Fed kept interest rates unchanged at 3.50%–3.75% during its June meeting.

Still, updated economic forecasts and remarks from Kevin Warsh, who chaired his first Fed meeting, were viewed as more hawkish than expected. Following the announcement, futures markets fully priced in a 25-basis-point rate hike for September, while also assigning a small probability to a potential increase as early as next month.

Despite the Dollar’s resilience, easing geopolitical tensions may limit further upside. Ongoing peace discussions between the US and Iran have improved market sentiment and reduced inflation concerns. According to CNBC, US Vice President JD Vance said negotiations had made “great progress,” although some tensions remain unresolved.

On Monday, Vance also stated that Iran had agreed to allow inspectors from the International Atomic Energy Agency back into the country. Iranian Foreign Minister Abbas Araghchi echoed the positive tone, noting that the Switzerland talks had produced “major progress.”

Gold holds steady near $4,200 as US–Iran peace progress offset by Fed hawkish stance

Gold prices remain flat near $4,190 during early Asian trading on Tuesday. Progress in US–Iran peace negotiations may pressure the precious metal, while expectations of a Fed rate hike later this year grow after the new Fed Chair struck a hawkish tone.

Gold prices remained steady near $4,190 during Tuesday’s early Asian session as traders monitored ongoing developments surrounding the US–Iran peace negotiations.

US Vice President JD Vance said talks between Washington and Tehran had made “great progress,” despite recent tensions. He noted that negotiations in Bürgenstock were continuing and that Iran had agreed to allow inspectors from the International Atomic Energy Agency back into the country.

However, discussions became strained after Iran announced the closure of the Strait of Hormuz in response to Israeli strikes on Lebanon, arguing the attacks violated the ceasefire agreement.

According to Saxo Bank analyst Ole Hansen, energy prices remain a major short-term driver for precious metals. He added that the uneven progress in US–Iran talks could pressure oil prices while supporting demand for gold.

Meanwhile, expectations for tighter US monetary policy also weighed on bullion. Markets increasingly anticipate a Federal Reserve rate hike later this year after new Fed Chair Kevin Warsh adopted a hawkish stance on inflation during his first policy meeting. Higher interest rates tend to reduce gold’s appeal since the metal does not offer yields.

Traders are now pricing in nearly an 89% probability of a Fed rate hike in December, up sharply from 61% before last week’s FOMC meeting, according to the CME FedWatch Tool.