Gold hovered near $4,200 per ounce on Friday as oil prices retreated amid growing optimism over a potential US-Iran peace agreement. Despite the day’s stabilization, bullion remained on course for a second straight weekly decline, weighed down by expectations of higher-for-longer interest rates.
US President Donald Trump said a deal could be reached as soon as this weekend, though Tehran noted that no final decision had yet been made. Since the onset of the Iran conflict, gold has come under pressure on fears that surging energy prices would fuel higher inflation, reinforcing the view that central banks will keep interest rates elevated.
Adding to that narrative, the European Central Bank on Thursday raised interest rates for the first time since 2023 and revised its inflation projections for 2026 and 2027 higher. In the US, producer prices rose 6.5% year-on-year in May, highlighting the inflationary impact of the Middle East energy shock and bolstering expectations that the Federal Reserve will deliver a rate hike later this year.
