Gold prices rose on Thursday, supported by a weaker dollar, as investors assessed growing optimism about a possible deal between the United States and Iran to end the war that has driven up energy prices and raised concerns about rising inflation.
Spot gold rose 0.7 percent to $4821.44 an ounce by 03:01 GMT. U.S. gold futures for June delivery rose 0.4 percent to $4844.40.
The U.S. dollar held near a six-week low, making dollar-denominated commodities, including gold, more affordable for holders of other currencies, while benchmark 10-year U.S. Treasury yields fell 0.1 percent.
Kelvin Wong, senior market analyst at OANDA, said: "The main driver (of the rise in gold prices) is optimism about a ceasefire between the United States and Iran."
He added: “If we start to see a break above $4900, further potential upside towards the next intermediate resistance zone, which lies at the psychologically significant $5000 level, cannot be ruled out.”
The Trump administration on Wednesday expressed optimism about reaching an agreement to end the war with Iran, while warning of increased economic pressure on Tehran if it continues its defiant stance.
President Donald Trump stated that he believes the war he launched against Israel in late February is nearing its end, despite the naval blockade he declared coming into effect and shipping traffic through the Strait of Hormuz remaining well below normal levels.
Spot gold prices have fallen by more than 8 percent since the start of the war with Iran in late February, amid concerns that rising energy prices could lead to inflation and keep global interest rates high.
While gold is considered a safe haven against inflation, rising interest rates negatively affect demand for this non-yielding metal.
In the United States, traders now see a 29 percent probability of a 25-basis-point interest rate cut this year. Before the war, forecasts predicted two cuts this year.
The spot price of silver rose 1.7 percent to $80.41 an ounce, while platinum climbed 1.2 percent to $2135.58. Palladium also gained 0.9 percent to $1587.39.