Key Takeaways
- Gold extended its rally to a third consecutive session, holding above the $4,700 per ounce mark
- Diplomatic progress between Washington and Tehran is reducing inflation concerns while driving crude oil lower
- The US dollar retreated to levels seen before the conflict escalation, strengthening gold’s appeal
- Silver recorded its most significant single-session gain in weeks, climbing more than 6% on Wednesday
- Market participants are turning attention to Friday’s employment data for insights into Federal Reserve policy direction
Precious metals continued their upward trajectory for a third consecutive session as diplomatic developments between Washington and Tehran drove crude oil prices lower and alleviated market concerns about persistent inflation.
Spot gold advanced 1% to reach $4,736.61 per ounce during Thursday’s trading session. June-dated US Gold Futures climbed 1.1% to settle at $4,746.86.
The yellow metal posted an impressive gain exceeding 3% on Wednesday — marking its strongest daily performance since the final week of March. This rally materialized following a substantial decline in crude oil values amid reports suggesting meaningful advancement in negotiations between the US and Iran.
According to reporting from Axios, the White House administration is approaching completion of a memorandum of understanding with Iranian officials aimed at resolving the ongoing conflict. Tehran confirmed it is examining the proposal. President Donald Trump indicated his belief that Iranian leadership desires an agreement.
Through social media channels on Wednesday, Trump announced the United States would conclude its military operations and remove its blockade of the Strait of Hormuz, contingent upon Iranian acceptance of specified conditions — though he characterized this as “perhaps, a big assumption.”
Oil plummeted more than 7% during Wednesday’s session before stabilizing Thursday as financial markets awaited additional clarity regarding the diplomatic negotiations.
The Connection Between Falling Energy Costs and Rising Gold Values
Decreasing energy costs diminish the threat of extended inflationary pressure. This dynamic subsequently drives US Treasury yields downward and undermines dollar strength, creating favorable conditions for gold appreciation.
Gold trades in US dollars globally, meaning a softer dollar enhances affordability for international purchasers. Additionally, since gold generates no yield, declining interest rates improve its relative attractiveness versus fixed-income securities.
“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 market commentary.
The US Dollar Index declined 0.1% during Asian market hours Thursday, remaining close to pre-conflict levels.
Gold had experienced an 11% decline since the US-Iran confrontation intensified in late February. The blockade of the Strait of Hormuz had propelled energy costs higher and intensified concerns that inflation would remain elevated, necessitating prolonged elevated interest rates.
Federal Reserve Officials Maintain Cautious Stance on Price Pressures
Not all market observers share this optimism. Chicago Federal Reserve President Austan Goolsbee and St. Louis Federal Reserve President Alberto Musalem both emphasized that inflation continues running above the central bank’s 2% objective.
Strategists at TD Securities cautioned that peace agreement developments are “extremely fragile to reversal” given that American and Iranian positions appear substantially unchanged from previous negotiation attempts.
Silver appreciated 1.9% to reach $78.79 per ounce Thursday, following Wednesday’s impressive 6.2% surge. Platinum registered modest gains, while copper remained essentially unchanged.
Market attention has now shifted to Friday’s US non-farm payrolls release. The employment figures could provide important guidance regarding whether the Federal Reserve will implement interest rate reductions during the remainder of the year.
Spot gold was trading at $4,701.96 per ounce as of 1:59 p.m. Singapore time Thursday.
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