COMEX gold was trading at $4,333.90 per ounce, up $95.10 or 2.24%, while COMEX silver rose to $70.36 per ounce, gaining $2.39 or 3.51%.
The rally comes after US and Iranian officials said they had reached a preliminary agreement to end the conflict in the West Asia, raising hopes of lower energy prices and reduced inflationary pressures. Oil prices fell sharply following the announcement, while the US dollar slipped to a 10-day low.
A softer dollar typically supports gold and silver because it makes dollar-denominated commodities cheaper for buyers using other currencies.
Lower crude prices have also eased concerns that inflation could remain elevated and force the US Federal Reserve to keep interest rates higher for longer. Markets have pared back expectations of another US rate hike later this year.
Gold, a non-yielding asset, tends to perform better when expectations for interest rates decline, as the opportunity cost of holding the metal falls.
Despite the latest rebound, gold prices remain significantly below the record highs seen earlier this year, having corrected sharply from levels reached during the peak of geopolitical tensions and concerns over disruptions to global oil supplies.
Analysts said the immediate drivers for the rally are the weaker dollar, falling oil prices and improving risk sentiment. However, the sustainability of the move will depend on whether the peace agreement holds and whether inflation continues to moderate.
For silver, the gains were even stronger, with the metal benefiting from both its safe-haven appeal and its industrial demand outlook. Silver often outperforms gold during periods of improving economic expectations because of its extensive use in sectors such as solar energy, electronics and manufacturing.
Outlook
In the near term, precious metals are likely to remain sensitive to developments in the West Asia, movements in the US dollar and expectations around Federal Reserve policy.
Analysts believe that while easing geopolitical tensions may reduce some safe-haven demand, longer-term drivers for gold, including concerns over fiscal deficits, currency debasement and central bank buying, remain supportive.
For Indian investors, any further weakness in the dollar could provide additional support to international bullion prices, though domestic prices will also depend on the movement of the rupee.
–With Reuters inputs
