Gold prices moved modestly higher during Asian trading on Friday as investors evaluated reports suggesting progress toward an extension of the ceasefire between the United States and Iran, while lingering concerns over inflation continued to influence sentiment across commodity markets.
Spot gold gained 0.4% to $4,514.27 per ounce by 02:40 ET (06:40 GMT), while U.S. gold futures advanced 0.3% to $4,543.75 per ounce.
The precious metal had fallen to its lowest level in two months during the previous session before reversing course and ending the day 0.8% higher following reports that Washington and Tehran could resume diplomatic negotiations.
Despite the rebound, gold remained on track to finish the week largely unchanged after a period of volatile trading driven by rapidly evolving developments in the Middle East.
Ceasefire hopes support broader market sentiment
Investor confidence improved after reports indicated that U.S. and Iranian officials had reached a preliminary understanding to prolong a 60-day ceasefire and reopen shipping routes through the Strait of Hormuz.
However, the proposed arrangement still requires approval from U.S. President Donald Trump as well as confirmation from Iranian authorities before it can take effect.
The possibility of a diplomatic breakthrough has eased some of the immediate geopolitical concerns that have dominated markets in recent weeks. Traditionally, periods of heightened international tension tend to boost demand for safe-haven assets such as gold.
In the current environment, however, investors are also grappling with concerns that higher oil and energy prices resulting from the Middle East conflict could lead to broader inflationary pressures, complicating the outlook for monetary policy.
Inflation concerns limit gold’s upside
While geopolitical uncertainty would normally provide support for bullion prices, expectations that inflation could remain elevated have raised concerns that the Federal Reserve may need to keep interest rates higher for longer.
“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.
Fresh economic data released on Thursday added to those concerns. The U.S. personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, increased by 3.8% year-on-year in April, marking its strongest annual rise in approximately three years.
The stronger-than-expected inflation reading reinforced market expectations that policymakers will maintain elevated borrowing costs well into next year.
Although Treasury yields eased slightly following the release, they remained close to multi-month highs, limiting the potential for a stronger rally in gold prices.
Other precious metals and copper decline
Elsewhere in the precious metals market, silver slipped 0.2% to $75.52 per ounce, while platinum also declined 0.2% to $1,920.30 per ounce.
Industrial metals were also under pressure. Benchmark copper futures on the London Metal Exchange fell 0.5% to $13,661.33 per tonne, while U.S. copper futures retreated 0.4% to $6.40 per pound.
The moves reflected a cautious tone across commodity markets as investors balanced signs of diplomatic progress in the Middle East against ongoing concerns over inflation, interest rates and the outlook for global economic growth.