Gold prices posted modest gains on Thursday after softer oil prices helped calm concerns about a renewed inflation surge, while investors continued to monitor diplomatic developments between the United States and Iran and looked ahead to key central bank decisions.
At 05:29 ET (09:29 GMT), spot gold was trading 0.2% higher at $4,079.70 per ounce after touching its lowest level in more than six months earlier in the day. Gold futures slipped 0.8% to $4,100.65 per ounce.
Investor sentiment improved following reports that diplomatic channels between Washington and Tehran remained open despite ongoing military confrontations.
Diplomatic Efforts Persist Amid Ongoing Conflict
According to CNN, U.S. and Iranian officials continued discussions over a potential peace agreement overnight, even as both nations carried out fresh air strikes for a second consecutive day.
Separately, Reuters reported, citing Iranian sources, that negotiations remain active regarding a preliminary arrangement that could include the release of frozen Iranian assets. The report noted that efforts to reach an agreement have gathered momentum in recent days.
Despite these diplomatic initiatives, uncertainty continues to dominate the outlook. President Donald Trump warned that additional military measures could be taken if Iran failed to immediately accept a peace agreement.
Military activity intensified after U.S. forces launched attacks on multiple targets across Iran between late Wednesday and early Thursday. In a statement, U.S. Central Command described the operations as “self-defense” following the downing of an American helicopter near the Strait of Hormuz earlier this week.
Iran responded with strikes against several U.S. military facilities and allied positions throughout the Gulf region. Media reports suggested explosions were heard in Kuwait, Bahrain and Jordan, although independent confirmation has yet to emerge.
Tehran also claimed that all shipping traffic through the Strait of Hormuz had been halted, an assertion denied by CENTCOM. The latest confrontation follows a series of intermittent attacks exchanged by both countries over the past two weeks as regional tensions have escalated.
Iran has also continued to exchange fire with Israel amid Israeli operations targeting Hezbollah forces backed by Tehran in Lebanon.
Lower Oil Prices Reduce Pressure on Inflation Expectations
Brent crude, the international benchmark for oil, moved lower during Thursday’s trading session, giving back part of the gains recorded after the latest military escalation.
While crude prices remain considerably above levels seen before the conflict erupted, the recent decline has eased some concerns that energy costs could trigger another wave of inflation.
Higher fuel prices have become a key concern for investors, who worry that central banks such as the Federal Reserve and the European Central Bank may be forced to tighten monetary policy further. Rising interest rates typically weigh on gold because the precious metal does not provide a yield.
Inflation concerns were reinforced on Wednesday after data showed U.S. consumer prices increasing at the fastest pace in years, largely driven by rising gasoline costs. Investors are now awaiting U.S. producer price figures later on Thursday for further insight into inflationary trends.
Central Bank Outlook Remains Key Market Driver
According to CME’s FedWatch Tool, financial markets now expect the Federal Reserve to raise interest rates before the end of 2026.
Attention is also focused on the European Central Bank, which is widely expected to announce a rate increase following its two-day policy meeting. Policymakers are attempting to curb inflationary pressures across the eurozone, where price growth remains above desired levels.
Meanwhile, the U.S. dollar has strengthened since the conflict began in late February, creating an additional headwind for gold. A stronger dollar generally makes bullion more expensive for international buyers holding other currencies.
On Thursday, the U.S. Dollar Index was last up 0.1% at 100.09.
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