Gold Prices Climb to Two-Week High
Gold prices extended their rally for a third straight session on Thursday, reaching their highest level in two weeks as easing tensions between the United States and Iran boosted demand for bullion.
A weaker U.S. dollar and falling oil prices also supported the precious metal, helping investors move back toward gold after recent geopolitical volatility.
Spot gold rose 1.2% to $4,747.26 per ounce, while June gold futures gained 1.3% to $4,753.71 per ounce.
Falling Oil Prices Boost Gold Demand
Gold prices had already surged more than 3% on Wednesday, marking the metal’s biggest single-day gain since late March.
The rally came as oil prices dropped sharply on expectations that tensions in the Middle East could begin easing if diplomatic negotiations between Washington and Tehran continue progressing.
According to Neil Welsh, Head of Metals at Britannia Global Markets, traders are now waiting for greater clarity regarding the diplomatic situation between the United States and Iran.
Welsh noted that Tehran is currently reviewing a new proposal that could potentially create a pathway toward reopening the Strait of Hormuz.
U.S.-Iran Peace Talks Remain in Focus
Reports suggest Iran is evaluating a fresh proposal from the United States aimed at ending the conflict that has lasted for more than two months.
Despite ongoing negotiations, President Donald Trump has continued warning that military action could resume if talks fail.
According to reports, Washington and Tehran are working through mediators on a 14-point framework designed to restart formal peace discussions. Negotiations are expected to begin next week in Pakistan.
The proposed talks could focus on resolving disputes surrounding Iran’s nuclear program, sanctions relief, uranium enrichment, and inspection requirements.
Trump said at the White House on Wednesday that discussions with Tehran had gone “very good” over the previous 24 hours and suggested the United States had effectively “won” the conflict.
CNN also reported that Iran is expected to provide mediators with its response to the latest U.S. proposal by Thursday.
Lower Inflation Fears Support Bullion
Oil prices declined again after suffering a major selloff during the previous session, although crude prices still remain above pre-conflict levels.
Earlier fears that the Strait of Hormuz could close had raised concerns about a major global energy shock. Since roughly one-fifth of global oil supply passes through the key shipping route, markets feared higher energy costs could fuel worldwide inflation.
Those concerns had increased expectations that central banks, especially the Federal Reserve, might keep interest rates elevated for longer.
However, easing oil prices have helped reduce inflation fears, pushing U.S. Treasury yields lower and improving the appeal of non-yielding assets such as gold.
Analysts at ING said lower energy prices could give the Federal Reserve more flexibility to reduce interest rates in the future, a scenario generally considered bullish for gold prices.
Weak Dollar Adds More Support for Gold
A softer U.S. dollar also strengthened gold’s appeal by making the metal cheaper for overseas buyers.
During the Iran conflict, the dollar had benefited from safe-haven demand, partly because investors viewed the U.S. economy as relatively protected from rising oil prices due to America’s status as a major energy exporter.
But improving geopolitical sentiment has weakened the greenback and encouraged investors to rotate back into risk assets and commodities.
Markets Await Key U.S. Jobs Report
Investors are now closely watching Friday’s U.S. non-farm payrolls report for additional clues regarding the Federal Reserve’s future interest-rate decisions.
Recent comments from Fed officials have highlighted concerns that the Middle East conflict could still disrupt supply chains and increase inflationary pressures.
However, the U.S. labor market has remained relatively resilient, keeping uncertainty around future Fed policy elevated.
