Gold Holds Gains on Iran Deal Prospects

Gold traded near $4,200 an ounce on Friday after rebounding more than 3% in the previous session, as growing optimism over an imminent peace deal between the US and Iran eased concerns about persistent inflation and potential interest rate hikes. President Donald Trump said a deal with Iran could be reached as early as this weekend after postponing planned attacks and warning that the US could target the country's oil infrastructure. Iran's semi-official Fars news agency also reported that Tehran was likely to accept the agreement, although no final text has been approved. Meanwhile, the ECB raised interest rates on Thursday for the first time since 2023 and lifted its inflation forecasts for 2026 and 2027. Data also showed US producer prices climbed 6.5% year-on-year in May, highlighting the inflationary effects of the Middle East energy shock and reinforcing expectations of a Federal Reserve rate increase this year.

Gold gave up most of its gains to trade at $4,080 per ounce on Thursday, their lowest level since November 2025, as investors processed fresh US PPI data, the European Central Bank’s rate hike, and intensifying Middle East tensions. US producer prices surged 6.5% year-over-year in May, the highest since November 2022 and above forecasts of 6.4%, underscoring the mounting impact of the energy-price shock from the Strait of Hormuz closure on the US economy. Combined with earlier data showing consumer prices rising at the fastest pace in three years, Thursday’s figures are likely to strengthen calls for the Federal Reserve to raise interest rates in 2026. Meanwhile, the ECB raised interest rates for the first time since 2023 and upwardly revised its inflation forecasts for 2026 and 2027. Adding to geopolitical concerns, US President Trump vowed further strikes on Iran and threatened to take control of its key energy infrastructure, including Kharg Island.

Gold edged above $4,100 an ounce on Thursday after the US military announced it had completed its latest strikes on Iran, raising hopes that peace negotiations could resume and tempering some concerns over inflationary pressures. Earlier, the US launched fresh attacks on Iran after President Trump accused Tehran of delaying talks on an interim peace agreement, while Iran reportedly responded by targeting US vessels in the Strait of Hormuz. Even so, gold remained near seven-month lows as the prolonged conflict and the continuing near-total closure of Hormuz disrupted energy flows from the Persian Gulf, fueling worries about higher inflation and interest rate hikes. Meanwhile, US inflation accelerated in May to its fastest pace in more than three years, driven by surging energy costs, though the reading matched market expectations. Traders slightly scaled back expectations for Federal Reserve rate hikes this year, although a quarter-point increase in December remains fully priced.