Gold prices rose on Thursday, after hovering near a near one-week low earlier in the session, as a weaker dollar countered pressure from renewed U.S.-Iran hostilities that prompted concerns about inflation and higher-for-longer interest rates.
Spot gold was up 0.8% at $4,107.69 per ounce by 0737 GMT, after dropping to its lowest since July 1 on Wednesday and Thursday. U.S. gold futures for August delivery were up 0.9% at $4,117.30.
The U.S. military said on Wednesday it launched fresh strikes on Iran to keep the Strait of Hormuz open to shipping, triggering Iranian attacks on Kuwait and Bahrain in the latest escalation to derail efforts to end the war.
On Thursday, U.S. President Donald Trump said that Iranian officials had called him, seeking a peace deal with Washington. The dollar eased 0.1%, making greenback-priced bullion more affordable for holders of other currencies.
"The dollar came down a bit because of the possibility of the Iranians making a deal with the U.S., as proclaimed by Trump," said Kelvin Wong, a senior market analyst at OANDA.
"After yesterday's skirmish, that temporary ceasefire agreement between U.S. and Iran is still on shaky ground right now, so things could turn pretty fluid again."
Markets are pricing a 65% chance of a U.S. rate hike in September, the CME FedWatch tool showed.
Concern about high inflation mounted at the Federal Reserve's meeting last month, as officials followed Chair Kevin Warsh's lead to a more stripped-down policy statement even amid concerns that price increases were broadening and might require rate hikes.
While gold is seen as an inflation hedge, high interest rates tend to weigh on the non-yielding asset.
Bank of America said it is reducing its 2026 average gold forecast by 14% to $4,360 an ounce, citing a more hawkish Fed.
Elsewhere, spot silver rose 1.5% to $59.14 per ounce, platinum advanced 2.2% to $1,611.83 and palladium gained 2.5% to $1,244.46. - Reuters
