Gold Surges Over 2.5% on US-Iran Deal Hopes, Weaker Dollar

Gold prices surged more than 2.5% in afternoon trading on Thursday, extending gains as hopes for a peace deal between the United States and Iran boosted demand for the safe-haven metal. President Trump called off planned strikes on Iran, fueling speculation that a diplomatic resolution could be near. The rally was amplified by broad-based central bank gold buying, which has been a key driver since 2022 as nations diversify reserves away from the US dollar amid geopolitical tensions. This institutional demand provides a structural floor under prices, complementing the speculative surge.

The rally in gold was driven by a sharp drop in US Treasury yields and a weaker US dollar, as market participants pushed back expectations for Federal Reserve rate hikes. According to Raffi Boyadjian, market analyst at brokerage XM, the decline in yields is weighing on the dollar, with rate hike expectations pushed back on hopes of a US-Iran deal. Lower yields reduce the opportunity cost of holding non-yielding gold, while a softer dollar makes the metal cheaper for foreign buyers. The real US 10-year yield, which adjusts for inflation, has turned deeply negative, historically a strong bullish signal for gold as it diminishes the appeal of bonds. Additionally, the COMEX-LBMA spread has widened, indicating tight physical supply in London relative to futures, which often precedes price spikes. For traders tracking real-time gold prices, NowPrice offers up-to-the-minute quotes on spot gold and futures.

Looking ahead, investors will focus on any further developments in US-Iran negotiations, as well as upcoming US economic data that could influence Fed policy. A sustained drop in yields and a weaker dollar could provide additional support for gold, but any signs of a breakdown in talks might reverse the gains. Key levels to watch include the recent highs near $2,400 per ounce. ETF flows into GLD and IAU have been positive this week, signaling renewed investor appetite, while jewelry demand in Asia remains robust despite high prices. The DXY inverse correlation with gold is likely to persist; a break below 104 in the dollar index could propel gold toward $2,500. However, any hawkish Fed surprise or Iran deal collapse could trigger a sharp pullback, testing support at $2,300.