Gold and silver prices staged a sharp recovery on Friday, breaking their longest losing streak since late March. Spot gold was little changed around $4,207 per troy ounce by mid-session in London, while US futures for August delivery surged 3% to $4,238.80. Silver jumped nearly 5% to $67 per ounce. The daily bounce, however, could not erase the week’s losses: gold was still down more than 2%, marking its second straight weekly decline, as the overriding influence of tighter monetary policy continued to weigh on the non-yielding metal.

Driving the intraday reversal was renewed optimism over a potential US-Iran peace deal. President Donald Trump’s suggestion that an agreement could be signed as soon as this weekend—potentially reopening the Strait of Hormuz—sent oil prices tumbling and eased demand for safe-haven assets. The dollar steadied after an initial slide, with the euro hovering near a one-week high at $1.158 in the wake of the European Central Bank’s first rate rise in three years. Sterling was largely unmoved by data showing the UK economy contracted in April, as currency markets focused squarely on the geopolitical headlines. In Tokyo, the yen remained pinned near the 160-per-dollar level, a threshold that has historically drawn nervous glances from Japanese authorities.

Despite the session’s relief rally, the broader trajectory for gold remains dictated by interest rate expectations. The ECB’s hawkish turn and persistent anticipation of further tightening by the Federal Reserve have dulled the appeal of bullion, which offers no yield. Analysts note that while geopolitical flare-ups can spark sharp but short-lived gains, the overriding driver is the pace of inflation and the resulting central bank response. The dollar’s resilience—particularly against the yen—adds another layer of pressure, making dollar-denominated gold more expensive for many buyers.

Looking ahead, traders are bracing for continued volatility. Confirmation of a US-Iran ceasefire could further sap haven demand, but any breakdown in talks would swiftly reignite bids for both gold and silver. The next major inflation prints from major economies will be critical in shaping rate expectations, while Tokyo’s tolerance for a weakening yen remains a wildcard. For now, precious metals are caught between geopolitical relief and the gravitational pull of higher global rates, leaving the complex vulnerable to sharp swings in either direction.