Gold Firms Up on Iran Deal Hopes

Gold traded above $4,500 an ounce on Thursday after rising more than 1% in the previous session, supported by growing optimism that an imminent peace agreement between the US and Iran could ease inflationary pressures and reduce concerns over interest rate hikes. President Donald Trump said the US was in the final stages of negotiations with Iran, fueling expectations that the strategically important Strait of Hormuz may soon reopen. The prospect of restored shipping flows triggered a sharp decline in oil prices, helping temper inflation fears and lowering expectations that central banks will need to tighten monetary policy. At the same time, minutes from the Federal Reserve’s latest policy meeting showed that most officials believe a rate increase this year could still be warranted if inflation remains above the Fed’s 2% target. Investors remain divided on whether the central bank will raise rates by December or leave borrowing costs unchanged through year-end.

Gold rose to above $4,530 per ounce on Wednesday, halting the drop that bottomed at a two-month low of $4,490 last session, and tracking the respite for Treasuries as signs of incoming energy supply from the Middle East tamed expectations of higher inflation. President Trump stated the US was close to an agreement to end the conflict with Iran, while three supertankers exited the Persian Gulf with cargoes to Asia. The developments supported the possibility that inflation could rise less than feared, dimming the risks of a hawkish Federal Reserve. Evidence of high inflation had led multiple policymakers to dissent against the easing bias in the Fed's last rate hold. On top of that, fresh minutes from the meeting indicated that a majority of members noted it may be appropriate to raise interest rates this year if inflation remains above the 2% threshold. Markets are split on whether the central bank may deliver a rate hike by December or whether rates will stay put.

Gold inched up to $4,530 an ounce on Wednesday, recovering from its lowest level since March 30, as hopes of a potential US-Iran conflict resolution eased some inflation concerns. President Donald Trump stated the war with Iran would end "very quickly," while Vice President JD Vance highlighted progress in talks with Tehran to cease hostilities. However, the prolonged conflict has kept the Strait of Hormuz effectively closed, maintaining oil prices above $100 a barrel and sustaining inflationary pressures. Accelerating US inflation has led traders to further scale back expectations for Federal Reserve rate cuts this year, while reinforcing bets that the central bank could still hike rates before year-end. Markets now price in a 40% chance of a December rate hike, with rate cut expectations pushed into 2027 on hopes the current inflation surge is temporary. Investors will also parse the minutes from the Fed’s April policy meeting for further clues.