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Iran's peace hopes and renewed rate-cut bets have led to a gold gain on the back of inflation fears.

Gold prices rose on Thursday, as the?hopes of a?peace deal between?the U.S.A. and Iran eased inflation concerns and improved prospects for low interest rates.

As of 9:00 am, spot gold was up 0.6% at $4,816.14 an ounce. ET (1300 GMT) after reaching a month-high in the previous session. U.S. Gold Futures rose?0.3% at $4,838.10.

David Meger is the director of metals trading for High Ridge Futures. He said that as war tensions continue de-escalate inflationary pressures are easing, which increases the chances of Federal Reserve rate cuts this year. This will also support demand for non-yielding steel. Sources said that optimism grew as the Iran war was nearing an end. A key Pakistani mediator had made a breakthrough in "sticky issues", but Iran still warned about the fate of its nuclear program.

The initial fall in gold prices was due to the U.S.-Israel war against Iran, which began late February. Liquidity pressures and inflation fears arose as energy prices rose. This led markets to reduce expectations of interest rates being cut. Gold is a zero-yielding investment that tends to lose its appeal when interest rates rise.

At the moment, traders believe that there is a 36% probability of a U.S. rate cut in this year. U.S. Treasury Secretary Scott Bessent stated that the U.S. economy would be slower in this 'quarter due to a heightened sensitivity towards Iran, but that it was still healthy and that it will recover. He also said that oil prices did not seem to be impacting inflation expectations. Silver spot?rose by 0.3%, to $79.27 an ounce. Silver is on track to reach its sixth consecutive year of structural deficit. 762 million troy ounces have been drawn from stock since 2021. This raises the risk of renewed liquidity pressure despite lower demand expectations.

Palladium rose 0.3% to $1,578.06 and platinum increased 0.9% at $2,129.55. Ashitha Shivprasad, Bengaluru (reporting) and Emelia Sithole Matarise, editing.

(source: Reuters)