Gold gains as anticipated U.S.-Iran deal could ease inflation fears

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Gold prices extended gains Friday as the U.S. and Iran appear close to a 60-day agreement that would reopen the Strait of Hormuz, with President Trump saying he is meeting with advisors to make "a final determination."

Optimism over a ceasefire extension lifted oil prices and pushed the dollar and bond yields lower, boosting dollar-denominated gold, which pays no interest and is priced in the greenback.

"Gold is thus continuing to behave contrary to its status as a safe haven asset and is moving in the opposite direction to the price of oil," Carsten Fritsch of Commerzbank said in a note. "This is because the market now views Fed interest rate hikes as less likely, a development from which gold benefits as a non-interest-bearing asset."

Meanwhile, data this week showed U.S. core PCE inflation—the Federal Reserve's preferred gauge of monthly price increases—grew at a slower 3.3% pace in April but remained above the Fed's 2% target rate, driven ​by higher energy ⁠prices linked to the Middle East conflict.

On Friday, front-month Comex gold (XAUUSD:CUR [https://seekingalpha.com/symbol/XAUUSD:CUR]) for June delivery jumped 1.3% to $4,560.50/oz, and front-month Comex June silver (XAGUSD:CUR [https://seekingalpha.com/symbol/XAGUSD:CUR]) finished flat at $75.616/oz.

For the month of May, gold fell 1.2% while silver gained 2.8%.

Gold has traded in a relatively narrow range since its initial drop at the start of the war, as traders weighed conflicting signals about progress toward a ceasefire; the metal is down ~14% since the end of February.

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