Gold prices moved higher on Thursday, recovering part of the previous session’s decline as investors balanced optimism over a U.S.-Iran peace agreement against the prospect of tighter monetary policy from the Federal Reserve.
Spot gold gained 0.3% to $4,269.42 an ounce by 05:46 ET (09:46 GMT), while gold futures edged 2.1% lower to $4,288.72 an ounce.
The precious metal had fallen 1.7% on Wednesday after the Federal Reserve’s latest policy announcement boosted both the U.S. dollar and Treasury yields.
Peace Agreement Eases Geopolitical Concerns
Gold found support from news that Washington and Tehran had signed an interim agreement designed to reduce tensions in the Middle East.
The accord establishes a 60-day negotiation period and includes provisions allowing toll-free passage through the Strait of Hormuz, one of the world’s most important energy shipping routes.
The framework also aims to restore traffic through the strategic waterway to full capacity within 30 days.
Investors viewed the agreement as a step toward reducing the risk of prolonged disruptions to global energy supplies, helping to stabilize market sentiment.
Bullion Benefits from Inflation Hedge Appeal
The prospect of improved energy flows has eased concerns over a sustained oil supply shock, but uncertainty surrounding the broader economic outlook continued to support interest in gold.
Many investors maintain exposure to bullion as a hedge against geopolitical risks and inflation-related volatility.
The metal’s gains reflected a degree of caution as markets assessed both the peace agreement and the outlook for global growth.
Federal Reserve Limits Upside
Despite the rebound, gold’s advance was restrained by signals from the Federal Reserve that borrowing costs could move higher later this year.
The central bank kept its benchmark interest rate unchanged at 3.50%-3.75% on Wednesday but indicated that policymakers remain open to further tightening if inflation pressures persist.
Updated forecasts revealed that nine of the Fed’s 19 officials now expect at least one interest rate increase in 2026, marking a significant shift from earlier projections.
Warsh Maintains Focus on Inflation
Federal Reserve Chair Kevin Warsh reinforced the central bank’s commitment to tackling inflation during his first policy meeting as chair.
Warsh emphasized the importance of restoring price stability, while the Fed also revised its inflation outlook higher.
The combination prompted investors to reduce expectations for future rate cuts and provided additional support for the U.S. dollar.
Stronger Dollar Creates Headwind
A firmer dollar typically weighs on gold by making the metal more expensive for buyers using other currencies.
At the same time, higher interest rates raise the opportunity cost of holding non-yielding assets such as bullion.
As a result, while geopolitical developments offered support to gold prices, expectations of tighter U.S. monetary policy continued to cap gains.