Gold gains on softer dollar as US-Iran peace deal hopes rise

Gold prices rose on Thursday, supported by a weaker dollar and lower U.S. ‌Treasury yields, as investors grew optimistic about a potential end to the Middle East war, which has stoked fears of higher inflation.

Spot gold rose 0.9% to $4,830.82 per ounce by 0455 GMT. U.S. gold futures for ​June delivery gained 0.6% to $4,853.40.

The U.S. dollar fell to its lowest level in ​six weeks, making greenback-denominated commodities, including bullion, more affordable for holders of ⁠other currencies.

Benchmark 10-year U.S. Treasury yields eased 0.1%, as hopes of a U.S.-Iran peace ​deal eased higher-for-longer U.S. interest rate bets.

"The primary driver (for gold) is the optimism about a ​U.S.-Iran ceasefire that is pushing down longer-term bond yields globally and that kind of created a lower opportunity cost of holding gold and silver," said Kelvin Wong, a senior market analyst at OANDA.

"If we start ​to see a break above $4,900, further potential upside cannot be ruled out towards the next ​intermediate resistance zone, which is at the psychological level of $5,000."

Optimism grew that the war may be near ‌an ⁠end, with a key Pakistani mediator in Tehran and the President Donald Trump administration talking up hopes for a deal that would open the crucial Strait of Hormuz.

On the other hand, Israel's cabinet met on Wednesday to discuss a possible ceasefire in neighbouring Lebanon, a senior Israeli ​official said, more than ​six weeks into its ⁠war with Iran-backed Hezbollah.

Spot gold prices have fallen more than 8% since the Iran war began in late February amid concerns that ​elevated energy prices could feed into inflation and keep global interest ​rates higher.

While ⁠gold is considered a hedge against inflation, higher interest rates weigh on the non-yielding metal's demand.

In the U.S., traders now see a 29% chance of a 25-basis-point interest rate cut this ⁠year. ​Before the war, there were expectations of two reductions ​for this year. FEDWATCH

Among other metals, spot silver rose 2% to $80.61 per ounce, platinum gained 1.6% to $2,143.08, and palladium was ​up 1.4% at $1,592.84.