Gold prices moved modestly higher on Thursday as a pullback in crude oil reduced some fears of a renewed inflation surge, while investors monitored developments in U.S.-Iran peace negotiations and awaited key central bank decisions.
By 05:29 ET (09:29 GMT), spot gold was up 0.2% at $4,079.70 per ounce after earlier falling to its lowest level in more than six months. Gold futures, however, were down 0.8% at $4,100.65 per ounce.
Market sentiment improved after reports suggested diplomatic efforts between Washington and Tehran remained active despite continued military exchanges between the two countries.
Peace Negotiations Continue Despite Military Escalation
CNN reported on Thursday that U.S. and Iranian officials continued discussions regarding a potential peace agreement overnight, even as both sides launched fresh air strikes for a second consecutive day.
Separately, Reuters cited Iranian sources as saying that negotiations were still underway over a preliminary framework that could include measures to release frozen Iranian funds. According to the report, efforts to secure an agreement have intensified in recent days.
Despite the ongoing diplomatic contacts, uncertainty remains high. President Donald Trump warned that further military action could be taken against Iran if Tehran failed to immediately accept a peace settlement.
The latest military developments saw U.S. forces strike multiple targets across Iran between late Wednesday and early Thursday. In a statement, U.S. Central Command described the attacks as “self-defense” following the downing of an American helicopter near the Strait of Hormuz earlier this week.
Iran responded with attacks targeting several U.S. military installations and allied positions in the Gulf region. Media reports indicated explosions were heard in Kuwait, Bahrain and Jordan, although these reports have not been independently confirmed.
Tehran also claimed that all maritime traffic through the Strait of Hormuz had been halted, a statement rejected by CENTCOM. The latest exchange follows a series of intermittent strikes between the two countries over the past two weeks amid broader regional tensions.
Iran has also continued to exchange attacks with Israel in connection with Israeli operations against Tehran-backed Hezbollah forces in Lebanon.
Oil Pullback Helps Support Precious Metals
Brent crude, the international benchmark for oil prices, moved lower during Thursday’s session, reversing part of the gains recorded following the latest military escalation.
Although oil prices remain significantly above levels seen before the conflict began, the recent decline has helped alleviate some concerns about a further acceleration in inflation.
Higher energy prices have been a major concern for financial markets, with investors worried that central banks, including the Federal Reserve and the European Central Bank, may need to respond with tighter monetary policy. Rising interest rates generally create headwinds for gold because the metal does not generate income.
Inflation concerns intensified on Wednesday after data showed U.S. consumer prices rising at the fastest pace in years, driven largely by higher gasoline costs. Investors are now looking ahead to U.S. producer price data later on Thursday for additional clues about inflation trends.
Interest Rate Expectations Remain in Focus
According to CME’s FedWatch Tool, markets now expect the Federal Reserve to raise interest rates before the end of 2026.
Attention is also centred on the European Central Bank, which is widely expected to announce a rate increase following the conclusion of its two-day policy meeting. Policymakers are attempting to contain inflationary pressures across the 21-member eurozone, where price growth remains elevated.
Meanwhile, the U.S. dollar has strengthened since the outbreak of the conflict in late February, adding another challenge for gold prices. A stronger dollar typically makes bullion more expensive for buyers using other currencies.
On Thursday, the U.S. Dollar Index was last trading 0.1% higher at 100.09.