TLDR
- Gold extended its rally to a third consecutive session, holding above the $4,700 threshold
- Diplomatic progress between Washington and Tehran is reducing inflation concerns and pressuring crude oil lower
- The US dollar retreated to levels seen before the conflict escalation, strengthening gold’s appeal
- Silver posted a 6% gain on Wednesday, marking its most significant one-day advance in recent weeks
- Market participants are awaiting Friday’s employment data for signals on Federal Reserve policy direction
Precious metals extended their rally for a third consecutive session as emerging diplomatic solutions between Washington and Tehran drove energy prices lower and diminished inflation anxieties.
Spot gold advanced 1% to reach $4,736.61 per ounce during Thursday’s trading. June-dated US Gold Futures increased 1.1% to settle at $4,746.86.
During Wednesday’s session, the yellow metal surged more than 3% — representing its strongest one-day performance since the final days of March. This upward movement followed a significant decline in petroleum prices amid reports suggesting meaningful advancement in bilateral negotiations.
Axios reported that the administration was nearing completion of a memorandum of understanding with Iranian officials to resolve the ongoing dispute. Tehran confirmed it was examining the framework. President Trump expressed confidence that Iranian leadership sought an agreement.
The President indicated via his social media platform Wednesday that Washington would halt its military operations and terminate the blockade affecting the Strait of Hormuz, contingent upon Iranian acceptance of specific conditions — while acknowledging this represented “perhaps, a big assumption.”
Oil plummeted over 7% during Wednesday’s session before stabilizing Thursday as traders awaited additional information regarding the diplomatic discussions.
The Connection Between Crude Prices and Bullion Strength
Declining petroleum costs diminish the likelihood of sustained inflationary pressure. This development subsequently reduces US Treasury yields and applies downward pressure on the dollar, creating favorable conditions for precious metals.
Gold trades in dollar denominations, meaning greenback weakness reduces purchasing costs for international investors. Additionally, since bullion generates no yield, lower bond returns enhance its relative attractiveness.
“The prospective reduction in energy costs provides the Federal Reserve with greater flexibility to implement rate cuts, creating a supportive environment for gold,” strategists at ING noted in their research commentary.
The US Dollar Index declined 0.1% during Asian market hours Thursday, remaining close to levels observed before hostilities escalated.
The precious metal had surrendered 11% of its value following the outbreak of US-Iran tensions in late February. The disruption of maritime traffic through the Strait of Hormuz had propelled energy costs higher and intensified concerns that elevated inflation would necessitate prolonged restrictive monetary policy.
Central Bank Officials Maintain Vigilance on Price Pressures
Not all observers share the optimistic outlook. Chicago Federal Reserve President Austan Goolsbee and St. Louis Federal Reserve President Alberto Musalem both emphasized that inflation metrics continue exceeding the central bank’s 2% objective.
TD Securities analysts cautioned that positive headlines surrounding peace negotiations remain “extremely fragile to reversal” given that fundamental positions from both Washington and Tehran appear substantially unchanged from previous negotiating rounds.
Silver increased 1.9% to reach $78.79 per ounce Thursday, following Wednesday’s impressive 6.2% surge. Platinum registered modest gains, while copper showed minimal movement.
Market attention has now shifted to Friday’s release of US non-farm payrolls data. The employment figures could provide critical insights into whether the Federal Reserve will implement interest rate reductions during the latter portion of this year.
Spot gold traded at $4,701.96 per ounce as of 1:59 p.m. Singapore time Thursday.
