Gold prices edged higher during Friday’s Asian trading session as investors monitored developments surrounding a potential ceasefire agreement between the United States and Iran while reassessing the outlook for U.S. interest rates following fresh inflation data.
By 3:50 pm AEST (5:50 am GMT), spot gold was trading 0.2% higher at US$4,505.27 per ounce, extending the previous session’s rebound from multi-month lows near the $4,400 level.
The modest recovery in bullion prices came as the U.S. dollar weakened overnight after reports emerged that Washington and Tehran had reached a draft agreement to extend the current ceasefire for another 60 days.
The softer greenback provided support for precious metals, with the U.S. dollar index declining 0.2%.
The reported progress in ceasefire negotiations also reduced concerns about prolonged disruptions to oil shipments through the Strait of Hormuz, helping keep crude oil prices near monthly lows and easing fears of a renewed surge in energy-driven inflation.
Meanwhile, investors continued to digest U.S. inflation data and rising expectations that the Federal Reserve may keep monetary policy tighter for longer.
Data released by the U.S. Bureau of Economic Analysis on Thursday showed that the personal consumption expenditures (PCE) Price Index accelerated to an annual rate of 3.8% in April, up from 3.5% in the previous month.
Core PCE inflation, which excludes volatile food and energy prices, rose 3.3%, in line with market expectations.
At the same time, revised economic data showed the U.S. economy expanded at an annualised rate of 1.6% during the first quarter of 2026, below the earlier estimate of 2.0%.
The weaker growth reading highlighted the increasingly difficult balance facing Federal Reserve policymakers as they attempt to contain inflation without significantly damaging economic activity.
Markets continue to price in the possibility of further monetary tightening later this year amid stubborn inflation and elevated energy prices linked to Middle East tensions.
According to the CME Group FedWatch Tool, traders are currently assigning roughly a 37.2% probability that the Federal Reserve will raise interest rates by 25 basis points (bps) before the end of 2026, and a 9.1% chance of a 50bps hike.
