Gold Gains Over 1% Amid Hopes for Resumed US-Iran Talks

Gold prices rose by more than 1% on Tuesday as the United States dollar weakened and market participants grew optimistic about a potential resumption of diplomatic talks between Washington and Iran. Spot gold gained 1.1% to reach $4,791.65 per ounce, while U.S. gold futures increased by 1% to settle at $4,815.40.

The potential for renewed negotiations in Pakistan this week has helped ease some inflation concerns. Sources indicated that negotiating teams could return to Islamabad following the collapse of talks over the weekend, which had prompted the U.S. to impose a blockade on Iranian ports. Bob Haberkorn, a senior market strategist at RJO Futures, noted that the market's trajectory is closely tied to these diplomatic efforts.

"The direction of the gold market will depend on how the talks go in Pakistan and what kind of progress is made heading into the weekend."

Haberkorn further explained that the current environment of a lower dollar and declining oil prices is benefiting the metal, especially after the initial rush to cash and energy supply concerns seen at the start of the conflict.

"Lower dollar, lower oil right now is helping gold out, being that when the war started, there was a rush to cash and a concern about being able to accumulate energy supplies."

Economic data released on Tuesday showed that U.S. producer prices rose less than expected in March, as service costs remained flat. However, surging energy prices linked to the conflict continue to fuel broader inflationary pressures. While gold is traditionally viewed as a hedge against inflation, its lack of yield can make it less attractive when interest rates rise. Traders are currently pricing in a 25% probability of a U.S. rate cut this year, a shift from previous expectations of two cuts prior to the outbreak of hostilities.

Analysts at Commerzbank suggested that the floor for gold prices remains solid as long as aggressive rate hikes are not on the table.

"As long as the market does not begin to seriously consider a rate hike by the U.S. Federal Reserve – there are no signs of this so far – the gold price is unlikely to fall much further."

In the broader precious metals market, Silver jumped 3.3% to $78.09 per ounce, and Platinum saw a modest gain of 0.1% to reach $2,072.13. Conversely, Palladium slipped 1%, trading at $1,558.80.