Diplomatic progress between Washington and Tehran eases energy supply fears, reducing inflation expectations and Fed rate hike bets.
Gold prices surged over 1.5% to $4,563 on Friday after reports of a potential 60-day ceasefire extension between the US and Iran. The advance followed news that negotiations could reopen the Strait of Hormuz and lift a US Navy blockade, easing global oil supply constraints.
Earlier, XAU/USD dipped to $4,489 before rebounding on optimism that a deal would temper energy-driven inflation. Oil prices fell more than 1.5% as traders priced in a diplomatic resolution, reducing pressure on central banks to tighten policy aggressively.
US economic data showed a narrowing trade deficit and a rebound in Midwest business activity, with the Chicago PMI climbing to 62.7 in May from 49.2 in April. The figures added to expectations of a softer Fed stance amid cooling inflation risks.