Gold prices posted modest gains in Asian trading on Friday as investors assessed signs of diplomatic progress between the United States and Iran, while remaining mindful of inflationary pressures stemming from elevated energy costs.
Spot gold climbed 0.4% to $4,514.27 an ounce by 02:40 ET (06:40 GMT), while U.S. gold futures rose 0.3% to $4,543.75 an ounce.
The yellow metal experienced sharp swings during the previous session, initially falling to its lowest level in two months before rebounding to finish 0.8% higher after reports suggested renewed negotiations between Washington and Tehran were on the horizon.
Despite the late recovery, gold was on course to end the week little changed overall, reflecting the uncertainty that has gripped markets amid shifting developments surrounding the Middle East conflict.
Potential Iran agreement improves risk appetite
Market sentiment received a boost after reports indicated that U.S. and Iranian negotiators had reached a tentative arrangement to extend a 60-day ceasefire and restore shipping access through the Strait of Hormuz.
The proposed agreement has yet to receive formal approval from U.S. President Donald Trump and still requires confirmation from Iranian officials.
Prospects for a longer-lasting truce have helped calm some of the geopolitical fears that recently supported demand for traditional safe-haven assets. Historically, periods of conflict and uncertainty tend to drive investors toward gold as a store of value.
However, the current market environment has created competing forces, with investors increasingly focused on the inflationary impact of higher oil and energy prices resulting from disruptions in the region.
Higher inflation expectations weigh on bullion
Although geopolitical tensions often provide support for gold prices, concerns that inflation may remain stubbornly high have strengthened expectations that the Federal Reserve could maintain restrictive monetary policy for an extended period.
“Markets remain cautious over whether diplomatic progress will hold, while concerns over higher energy prices continue to fuel inflation risks. This could reinforce expectations that interest rates stay higher for longer – a negative for non-yielding assets like gold,” ING analysts said in a note.
Adding to the cautious mood, data released on Thursday showed that the U.S. personal consumption expenditures (PCE) price index — the inflation measure most closely watched by the Federal Reserve — rose 3.8% year-on-year in April, marking the strongest increase in roughly three years.
The stronger inflation reading reinforced market expectations that policymakers will be reluctant to ease monetary policy in the near term and could keep borrowing costs elevated well into next year.
While Treasury yields moved slightly lower following the release, they remained close to their highest levels in several months, reducing the attractiveness of gold relative to interest-bearing assets.
Precious and industrial metals trade lower
Elsewhere, silver prices slipped 0.2% to $75.52 per ounce, while platinum declined by the same margin to $1,920.30 per ounce.
Industrial metals also weakened, with benchmark copper futures on the London Metal Exchange falling 0.5% to $13,661.33 per tonne. U.S. copper futures likewise moved lower, shedding 0.4% to $6.40 per pound.
The broader commodities complex remained caught between optimism surrounding diplomatic efforts in the Middle East and concerns that elevated energy costs could continue to pressure inflation, interest-rate expectations and global economic activity.
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