Why gold prices are rising despite easing Middle East fears?

Gold advanced for a third consecutive session on Thursday, propelled by a softer dollar and growing, if still fragile, optimism that Washington and Tehran may be edging towards a diplomatic settlement.

Spot gold was up 0.3% at $4,701.19 per ounce — its strongest print since 27 April — while the June futures contract gained 0.4% to $4,710.60.

The metal has now surged more than 3% this week alone.

Tehran confirmed on Wednesday that it is reviewing a US peace proposal, a move that sources say would formally end hostilities while leaving unresolved Washington's demands that Iran suspend its nuclear programme and guarantee safe navigation of the Strait of Hormuz.

Iran was quick to add that it has no interest in direct negotiations, underscoring the depth of mistrust that still separates the two governments.

Deal hopes and a softer dollar lift bullion

The dollar edged 0.1% lower to 97.12 Japanese yen as benchmark 10-year Treasury yields continued their retreat, easing by 0.6% so far this week.

Falling yields reduce the opportunity cost of holding gold, which pays no interest, and simultaneously make the metal cheaper for investors holding other currencies — a double tailwind that traders have been quick to exploit.

Oil markets reflected a similar mood, with Brent crude declining roughly 6% for the week as traders unwound the geopolitical risk premium that had accumulated since the conflict in the Middle East began in late February.

That same conflict had at one point dragged gold more than 10% off its peaks, before the prospect of a ceasefire reversed course.

Precious metals entered Thursday's session in a holding pattern ahead of US payrolls data due on Friday and a Federal Reserve policy meeting next week, where officials are widely expected to leave interest rates unchanged.

Central banks elsewhere have been cutting rates, lending an additional tailwind to non-yielding assets such as gold.

Analyst view and trading range

Analysts said a weaker US dollar and softer Treasury yields helped lift gold prices.

US proposal could support broader market sentiment in the near term.

However, the analyst expect gold to remain range-bound over the coming weeks, trading between $4,600 and $5,100 per ounce as easing geopolitical tensions compete with lingering uncertainty around Iran’s nuclear programme and the Strait of Hormuz.

Markets are also tracking any escalatory signals from the region.

Earlier this week, regional tensions remained elevated as reports of drone incidents and US military operations involving Iran-backed groups continued alongside diplomatic efforts to sustain a fragile détente.

The episode illustrated just how quickly the situation can shift — and how sensitive gold remains to each headline.

Other precious metals snapshot

Silver outperformed gold on a percentage basis, rising 0.5% to $77.68 per ounce, buoyed by the same macro backdrop of dollar weakness and falling yields.

Platinum slipped 0.5% to $974.50, whilst palladium also edged lower, with both metals weighed down by softer industrial demand signals.

Ahead of Friday's employment report and next week's Fed decision, all four metals remained broadly range-bound, with traders reluctant to take outsized positions until the macro picture becomes clearer.