Spot gold staged a strong recovery after opening lower on Thursday. Prices initially fell toward the $4,050 level before buyers stepped in aggressively, erasing the previous session's losses and pushing gold back above the key $4,100 threshold.

Following Wednesday's decline, bargain hunters returned to the market, providing fresh support for bullion. Meanwhile, mediators from Qatar, Pakistan, and other regional players have intensified diplomatic efforts to ease tensions between the United States and Iran and create conditions for renewed nuclear negotiations. These developments helped ease concerns over escalating conflict in the Middle East. As oil prices retreated on Thursday, inflation worries softened, the U.S. dollar weakened, and gold found room to rebound.

The recovery came after another round of military escalation. For a second consecutive day, U.S. forces launched strikes against Iranian infrastructure, including bridges, airports, and port facilities. Iran subsequently responded by targeting U.S. military installations located in Gulf countries.

Since the outbreak of the U.S.-Iran conflict, gold's traditional safe-haven narrative has evolved into a more complex chain of market reactions. Geopolitical tensions have driven oil prices higher, which in turn have fueled inflation expectations. Higher inflation expectations reinforce the case for further Federal Reserve tightening, while higher interest rates typically weigh on non-yielding assets such as gold. As a result, an unusual market dynamic has emerged: the more severe the conflict becomes and the higher oil prices rise, the greater the pressure on gold.

However, sentiment shifted on Thursday after signs of diplomatic progress emerged. U.S. President Donald Trump stated that Iran had contacted the United States and expressed its willingness to reach an agreement. The remarks quickly boosted market optimism and eased geopolitical concerns.

Officials from Qatar, Pakistan, Türkiye, Egypt, and Saudi Arabia reportedly held multiple discussions with both Washington and Tehran on Wednesday, seeking to reduce tensions amid the escalating military conflict. Their immediate priority is to de-escalate the situation before arranging the next round of technical negotiations, signaling a renewed effort to move both sides back toward diplomatic engagement.

The prospect of renewed negotiations triggered a pullback in oil prices from intraday highs. Lower energy prices helped cool inflation expectations, pushing U.S. Treasury yields and the U.S. dollar lower, which in turn created favorable conditions for gold's rebound.

Adding to the supportive backdrop, the President of the Federal Reserve Bank of New York stated on Thursday that despite renewed hostilities in the Middle East, energy prices are unlikely to remain elevated for the rest of the year. The comments helped reassure investors that inflation risks may remain contained, providing additional support for gold prices.

Market Insight:

On the 4-hour chart, gold continues to rebound within a broader consolidation range. The MACD lines and histogram remain close to the zero axis with weakening momentum, suggesting the current recovery remains cautious.

From a medium- to long-term perspective, structural bullish drivers remain firmly in place. Continued central bank gold purchases and the ongoing trend toward de-dollarization continue to underpin demand. According to recent surveys, 89% of central bank reserve managers expect global central bank gold holdings to increase over the next 12 months. Meanwhile, China's official gold reserves expanded for a 20th consecutive month, with an additional 480,000 ounces purchased this week.