Gold holds steady, eyes fourth weekly gain on US-Iran peace deal hopes

NEW YORK: Gold held largely steady on Friday and was on track for a fourth straight weekly gain, as hopes for a US-Iran peace deal eased fears of higher inflation and elevated interest rates.

Spot gold was unchanged at 4,789.67 per ounce, as of 0229 GMT, but up 0.9 per cent for the week. US gold futures for June were steady at US$4,809.30.

A 10-day ceasefire between Lebanon and Israel went into effect on Thursday and US President Donald Trump said the next meeting between the US and Iran may take place over the weekend.

"Investors are now watching closely for concrete progress in US-Iran negotiations. Any progress or extension of the current fragile ceasefire could further calm oil markets and inflation fears, potentially unlocking more upside for gold," said Tim Waterer, chief market analyst at KCM Trade.

The US dollar firmed after hitting a six-week low in the last session, but was headed for a second weekly drop. A weaker dollar makes greenback-denominated commodities more affordable for holders of other currencies.

Oil prices fell, easing fears of higher inflation on optimism that the Iran war could be nearing an end.

Concerns that higher energy prices could stoke inflation and keep global interest rates higher for longer have driven down gold prices by more than eight per cent since the Iran war began in late February.

While gold is considered an inflation hedge, higher interest rates crimp demand for the non-yielding asset.

Traders now see a 27 per cent chance of a 25-basis-point Federal Reserve interest rate cut in December. Before the war, there were expectations of two reductions for this year.

"While we expect further downside pressure (on gold) as the year progresses, ongoing geopolitical risks are likely to keep prices supported above a firm floor of US$3,500/oz, underpinned by gold's safe-haven characteristics," BMI, a unit of FitchSolutions, said in a note.

Spot silver eased 0.2 per cent to US$78.26 per ounce, but was headed for a fourth straight weekly gain.

Platinum lost 0.5 per cent to US$2,075.30, while palladium was up 0.1 per cent at US$1,552.91. Both the metals were on track for a third straight weekly gain.