Gold Prices Rise Over 1% as Easing Dollar and Oil Prices Temper Inflation Fears

Gold prices climbed more than 1% on Thursday, rebounding sharply from a one-week low as a weaker U.S. dollar and a retreat in oil prices helped alleviate investor concerns about inflation. The move reversed the previous day's losses, which were driven by an escalation in military tensions between the United States and Iran.

Market Drivers

By 16:45 ET, spot gold was up 1.2% to $4,124.36 per ounce, while U.S. gold futures for delivery also rose 1.2% to $4,133.17 per ounce, according to data from Investing.com. The rally in the precious metal, a non-yielding asset, was supported by two key factors.

A pullback in the U.S. dollar made gold less expensive for holders of other currencies. Concurrently, a decline in crude oil prices tempered inflation expectations, which can reduce pressure on the Federal Reserve to pursue aggressive monetary tightening. A less hawkish central bank outlook is typically supportive for gold.

Geopolitical Backdrop

The market's risk sentiment improved after U.S. President Donald Trump said Iran wanted to "make a deal so badly," according to the source. These comments helped cool oil prices, which had surged earlier in the week following military exchanges between the two nations.

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The U.S. military had launched strikes against approximately 170 targets in Iran in response to attacks on commercial oil tankers. Iranian armed forces retaliated by striking U.S. bases in the region, according to state media cited in the report. The subsequent de-escalation in rhetoric eased safe-haven demand for the dollar and weighed on oil, benefiting gold.

Federal Reserve Outlook

Investors also digested minutes from the Federal Reserve's June 16-17 policy meeting, which revealed a divided committee on the path for interest rates. While a few participants argued for raising rates, the minutes showed that "most" also pointed to scenarios where inflation would return toward the Fed's 2% target on its own.

David Morrison, senior market analyst at Trade Nation, noted that policymakers are hoping lower oil prices will "lead to a sudden drop in inflation," thereby reducing "the need for aggressive monetary tightening." This view was reinforced by New York Fed President John Williams, who on Thursday stated he did not expect a sustained increase in energy prices.