Gold prices rebounded during Thursday's Asian session, recovering much of the previous day's losses as an easing U.S. dollar and optimism surrounding the U.S.-Iran peace agreement boosted demand for the precious metal.
By 3:45 pm AEST (5:45 am GMT), spot gold was up 1.1% at US$4,305.17 an ounce, briefly climbing back above the US$4,300 level after falling sharply following the Federal Reserve's latest policy decision.
The recovery came as investors welcomed confirmation that the United States and Iran had signed a memorandum of understanding aimed at ending the nearly four-month conflict and reopening the Strait of Hormuz, easing geopolitical uncertainty that has dominated markets in recent months.
Improved risk sentiment weighed on the U.S. dollar, reducing the currency's safe-haven appeal and helping dollar-denominated gold recover almost all of Wednesday's decline.
Earlier, a White House official confirmed that U.S. President Donald Trump had electronically signed the memorandum of understanding designed to halt hostilities with Iran and begin a broader negotiation process.
The move helped shift investor focus away from geopolitical risks and back towards economic data and monetary policy.
Gold had come under heavy pressure on Wednesday after the Federal Reserve delivered a more hawkish-than-expected policy message despite leaving interest rates unchanged.
The central bank maintained its benchmark federal funds rate within a target range of 3.50% to 3.75%, in line with market expectations.
However, the updated Summary of Economic Projections revealed a notable shift in policymakers' outlook, with nine Federal Reserve officials now forecasting at least one interest rate increase this year.
The Federal Open Market Committee also removed language from its policy statement that had previously suggested its next move could be a rate cut, signalling a stronger commitment to containing inflation.
Warsh also confirmed the Federal Reserve had removed elements of forward guidance from its policy framework, signalling a more data-dependent approach.
While the Federal Reserve maintained a steady tone during the press conference, officials repeatedly emphasised that returning inflation to the 2% target remains the central bank's primary objective.
Policymakers stressed there was "no reason" to reconsider that target until it had been achieved, reinforcing expectations that monetary policy could remain restrictive for an extended period.
The Fed's stance remains broadly supportive of the U.S. dollar and higher bond yields over the longer term, both of which can act as headwinds for non-yielding assets such as gold.
Market attention is now turning towards a series of U.S. economic releases that could shape expectations for future Federal Reserve policy decisions.
Investors will closely monitor weekly jobless claims data later in the U.S. session after figures showed retail sales rose for a fourth consecutive month, highlighting continued resilience in consumer spending despite higher borrowing costs and geopolitical uncertainty.
Traders are also awaiting the Bank of England's latest policy decision, which could provide further insight into the global interest rate outlook and influence movements across currency and precious metals markets.
