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Gold prices edged higher on Friday but remained on course for a weekly loss as investors weighed growing optimism over a potential U.S.-Iran peace agreement against expectations of tighter monetary policy from major central banks.
Spot gold rose 0.2% to $4,218.91 per ounce, while gold futures gained 3.1% to close at $4,239.75 per ounce. Despite the late-week recovery, spot gold declined 2.6% for the week and futures fell 2.9%, reflecting reduced demand for safe-haven assets.
Market sentiment improved after U.S. President Donald Trump announced that a peace agreement with Iran had been approved and could be signed as early as this weekend. The proposed deal is expected to reopen the Strait of Hormuz, a crucial global energy shipping route that handles nearly 20% of the world’s oil and gas supplies. The agreement would also address concerns over Iran’s nuclear ambitions.
Although Trump later criticized reports regarding the deal’s terms, Iranian Foreign Minister Seyed Abbas Araghchi stated that a memorandum of understanding between Washington and Tehran had “never been closer.” Pakistan, which has played a key mediation role, also expressed confidence that both sides had reached a final text and were working toward implementation.
The prospect of easing geopolitical tensions pressured oil prices, with Brent crude falling to its lowest level in more than two months. Lower energy prices helped reduce demand for traditional safe-haven investments such as gold.
Investors are also closely watching next week’s central bank meetings, including the U.S. Federal Reserve, Bank of Japan, and Bank of England. Recent U.S. inflation data showed headline Consumer Price Index (CPI) and Producer Price Index (PPI) readings rising to their highest annual levels in more than three years, driven partly by elevated energy costs.
While core inflation remains relatively moderate, persistent price pressures and a resilient labor market have strengthened expectations that the Federal Reserve may maintain higher interest rates for longer. Higher interest rates typically weigh on gold because the precious metal does not generate yield.
Analysts at JPMorgan expect the Federal Reserve to keep rates unchanged at its upcoming meeting but anticipate a more hawkish tone from policymakers as inflation remains above target. As markets await key policy decisions and further developments in the U.S.-Iran negotiations, gold prices are likely to remain sensitive to both geopolitical and economic signals.
