Gold Prices Rebound Over 1% as Dollar Softens and Oil Retreats

Gold prices surged more than 1% on Thursday, recovering sharply from a one-week low as a retreat in the U.S. dollar and falling oil prices eased investor concerns about persistent inflation.

Bullion's advance marks a reversal from the previous session, where escalating military exchanges between the United States and Iran had bolstered the dollar's safe-haven appeal and pushed gold lower.

Price Action

By late afternoon trading on Thursday, key gold benchmarks showed significant gains:

• Spot gold rose 1.2% to trade at $4,124.36 per ounce.
• Gold futures also climbed 1.2% to settle at $4,133.17 per ounce.

A weaker U.S. dollar was a primary catalyst for the rally. A softer greenback makes dollar-denominated assets like gold more affordable for investors holding other currencies, which can stimulate demand.

Market Drivers

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The rebound was influenced by shifting geopolitical and monetary policy expectations. Oil prices declined after U.S. President Donald Trump commented that Iran wanted to "make a deal so badly," which traders interpreted as a sign of potential de-escalation in the Middle East. The drop in crude oil eased immediate inflationary pressures, a complex factor for gold, which is often used as an inflation hedge.

Meanwhile, market participants continued to analyze minutes from the Federal Reserve's June meeting. The report revealed a divided Federal Open Market Committee (FOMC) on the future path of interest rates. While some policymakers argued for an immediate rate hike, others anticipated that inflation would moderate on its own.

David Morrison, a senior market analyst at Trade Nation, noted that some Fed members are likely hoping that "lower oil prices, resulting from a wind-down in U.S./Iranian hostilities... should lead to a sudden drop in inflation," potentially reducing the need for further monetary tightening.

Context

Thursday's gains followed a volatile session on Wednesday. Gold prices had initially fallen as the U.S. military conducted strikes on approximately 170 targets in Iran in retaliation for attacks on oil tankers. The conflict briefly spiked crude prices and strengthened the dollar, weighing on the precious metal before President Trump's subsequent remarks calmed market sentiment.