Gold (XAU/USD) retreated from earlier gains on Thursday but remains within a range that has persisted for several weeks, as traders refrain from making strong investment decisions pending clearer signals regarding the US-Iran peace talks. Gold (XAU/USD) is currently trading around $4,795, after reaching a high of $4,838 earlier in the day, while a slight recovery in the US dollar (USD) is acting as a headwind.

 

Optimism Grows Over US-Iran Talks

Markets remain cautiously optimistic about the possibility of an agreement to end the trade war between the United States and Iran, with reports suggesting that a two-week extension of the ceasefire is under consideration to allow more time for negotiations.

White House spokeswoman Carolyn Leavitt said on Wednesday that talks with Iran were "productive," while denying reports that the United States had requested an extension of the ceasefire, which is set to expire next week.

Meanwhile, Pakistani Army Chief Asim Munir arrived in Tehran to deliver a direct message from Washington to the Iranian leadership. This development follows comments by US President Donald Trump, who indicated that negotiations could resume this week after last weekend's talks in Islamabad failed to achieve any tangible progress.

A senior Iranian official said on Thursday that the Pakistani army chief's visit "helped narrow the differences in some areas," adding that "there are now greater hopes for extending the ceasefire and holding a second round of talks." However, "fundamental differences remain on nuclear issues."

Separately, Iran is seeking to formalize its control over the Strait of Hormuz, with state media reporting that any planned transit fees will be paid through Iranian banks, underscoring the country's efforts to tighten its grip on a key global oil chokepoint.

 

Gold Price Forecasts Linked to US-Iran Developments and Oil Prices

While diplomatic efforts have improved investor sentiment, the situation remains far from resolved. A potential agreement between the US and Iran remains a crucial factor for gold, which is currently trading about 10% below its highest level since the start of the war. The inflationary risks stemming from high oil prices have fueled expectations that central banks, particularly the Federal Reserve, may be forced to raise interest rates.

Although crude oil prices have fallen from their recent highs, reviving some expectations of a Federal Reserve rate cut, they remain elevated due to the continued disruption of supplies through the Strait of Hormuz caused by the dual blockade imposed by US and Iranian forces. This keeps inflation concerns in focus and reinforces expectations that the Federal Reserve will keep interest rates unchanged in the near term.

If tensions ease further and oil prices decline, this could help reduce inflationary pressures and ease the burden on central banks, which in turn could support gold.

St. Louis Federal Reserve President Alberto Musallam stated that "supply shocks jeopardize the Fed's inflation and employment goals," adding that "the current interest rate range is likely appropriate for some time." He also noted that "the oil price shock may impact core inflation, which could remain close to 3% through the end of the year."