TLDR
- Gold extended its winning streak to three consecutive sessions, holding above $4,700 per ounce
- Diplomatic progress between Washington and Tehran is reducing inflation concerns and pressuring crude oil downward
- The US dollar retreated to levels seen before the conflict escalation, strengthening gold’s appeal
- Silver posted its strongest single-session advance in weeks, climbing more than 6% on Wednesday
- Market participants are shifting focus to Friday’s employment data for insights into Federal Reserve policy direction
Precious metals extended their rally as diplomatic developments between Washington and Tehran fueled optimism that energy prices would decline and inflation pressures would ease.
Spot gold advanced 1% to reach $4,736.61 per ounce during Thursday’s trading session. June-dated US Gold Futures increased 1.1% to settle at $4,746.86.
The yellow metal recorded a substantial 3% surge on Wednesday—marking its most significant daily advance since the final days of March. This momentum followed a sharp decline in crude oil prices triggered by emerging reports of substantive progress in bilateral negotiations.
Axios, a prominent news organization, disclosed that administration officials were nearing completion of a memorandum of understanding with Iranian counterparts aimed at resolving the ongoing dispute. Iranian authorities confirmed they were evaluating the framework. President Donald Trump expressed confidence that Tehran was committed to reaching an agreement.
In a Wednesday social media statement, Trump indicated the United States would terminate its military operations and remove its blockade from the Strait of Hormuz, contingent upon Iranian acceptance of specified conditions—though he acknowledged this might constitute “perhaps, a big assumption.”
Oil plummeted more than 7% during Wednesday’s session before stabilizing Thursday as traders awaited additional clarity regarding the diplomatic discussions.
Energy Price Decline Benefits Gold Markets
Decreasing energy costs diminish expectations of persistent inflation escalation. This development subsequently pressures US Treasury yields downward and undermines dollar strength, creating favorable conditions for gold appreciation.
Gold trades in dollar denominations, meaning a softer greenback enhances purchasing power for international investors. Additionally, since gold generates no yield, declining interest rates improve its competitive positioning relative to fixed-income securities.
“The possible reduction in energy costs provides the Federal Reserve with greater flexibility to implement rate cuts, which creates a supportive environment for gold,” according to ING analysts in their market commentary.
The US Dollar Index declined 0.1% during Asian market hours Thursday, maintaining positions near levels observed before hostilities intensified.
Gold had surrendered 11% of its value following the outbreak of US-Iran tensions in late February. The disruption at the Strait of Hormuz had propelled energy costs higher and intensified concerns that inflation would remain elevated, potentially keeping monetary policy restrictive for an extended period.
Federal Reserve Officials Maintain Vigilance on Price Pressures
Not all observers share the optimistic outlook. Chicago Federal Reserve President Austan Goolsbee and St. Louis Federal Reserve President Alberto Musalem both emphasized that inflation continues running above the central bank’s 2% objective.
Strategists at TD Securities cautioned that positive headlines surrounding peace negotiations remain “extremely fragile to reversal” given that fundamental positions from both Washington and Tehran appear substantially unchanged from previous negotiating rounds.
Silver appreciated 1.9% to $78.79 per ounce Thursday, following Wednesday’s impressive 6.2% rally. Platinum registered modest gains, while copper prices remained largely unchanged.
Market attention has now turned to Friday’s US non-farm payrolls release. The employment figures could provide critical insights regarding the Federal Reserve’s inclination toward interest rate reductions in upcoming months.
Spot gold traded at $4,701.96 per ounce as of 1:59 p.m. Singapore time Thursday.
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