Gold prices rose on Tuesday, supported by a softer dollar and easing inflation fears as oil prices dropped on hopes of further US-Iran peace talks.
Spot gold was up 0.8% at $4,775.20 per ounce, as of 0755 GMT. US gold futures for June delivery rose 0.7% to $4,798.40, Reuters reported.
Oil prices fell below $100 a barrel as signs of potential talks to end the US-Iran war eased concerns about supply risks stemming from the US blockade of Iranian ports.
Higher crude prices feed into inflation by raising transportation and production costs. While gold is treated as a hedge against inflation, higher interest rates weigh on the non-yielding metal's demand.
Markets appear to think that there's still time for a deal between the United States and Iran, said Ilya Spivak, head of global macro at Tastylive. Reuters reported on Tuesday that negotiating teams from the US and Iran could return to Islamabad this week, days after talks between the two countries ended in the Pakistani capital without a breakthrough.
The US dollar fell to its lowest level in more than a month on hopes for a diplomatic breakthrough, making the greenback-denominated gold more affordable for holders of other currencies.
"Near-term, a thin macro calendar might make US-Iran headlines the driving engine. That sets the stage for choppy price action for now," Spivak said, adding that gold could face resistance around $4,850.
Traders currently see a 31% chance of a 25-basis-point US rate cut this year, up from about 13% last week. Before the war, there were expectations of two cuts for this year.
Among other metals, spot silver rose 2.9% to $77.73 per ounce, platinum gained 0.8% to $2,086.15, and palladium was up 0.7% at $1,585.42.
