Gold (XAU/USD) rebounded to $4,240 in early Asian trading Friday, recovering from a six-month low after President Donald Trump said he called off planned military strikes against Iran.

Spot gold had surged 2.4% to $4,169.42 Thursday, after slipping to its lowest since late 2025. The move came as oil prices slid and the dollar weakened on hopes a US-Iran truce deal is close.

The reversal was sharp. Trump posted on Truth Social: "Based on the fact that discussions with the Islamic Republic of Iran have been brought to the highest level of Iranian leadership and approved, I have cancelled the scheduled strikes and bombings against Iran this evening." 

He added that "discussions and final points have been approved by all parties" including the U.S., Israel, Saudi Arabia, UAE, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan, Egypt, and others. The naval blockade will remain until the deal is finalized.

What Happened: From Kharg Island Threat to Truce Hopes

The session was volatile. Gold initially rose on reports of ongoing peace talks, then seesawed after Trump promised to hit Iran "very hard tonight" and threatened Kharg Island — the primary terminal for most of Iran's crude exports. Prices advanced only after the cancellation post.

The BBC reported Trump said negotiations were "brought to the highest level of Iranian leadership and approved." Iran countered that it "has not yet reached a final conclusion regarding an agreement." CNN reported the U.S. and Iran carried on negotiations overnight. Reuters cited Iranian sources saying talks included a mechanism to unfreeze Iranian funds.

Military action continued through the confusion. U.S. Central Command said the U.S. struck multiple military targets in Iran through late Wednesday and early Thursday, calling the attacks "self-defense" after the downing of an American helicopter near the Strait of Hormuz. Iran retaliated with strikes against U.S. bases and allies in the Gulf, with explosions heard across Kuwait, Bahrain, and Jordan. Iran claimed it blocked all ship traffic through Hormuz — a claim CENTCOM denied.

The Macro Cap: Hot PPI and 67% Fed-Hike Odds

The bounce faces headwinds. Headline U.S. producer price index rose 1.1% month-over-month and 6.5% year-over-year in May — hotter than the 0.7% and 6.4% consensus. Core PPI ticked up 0.4% M/M and 4.9% Y/Y, softer than the 0.5% and 5.4% estimates but still elevated. The CPI print Wednesday also showed annual headline inflation at a three-year high.

Rate cuts are likely off the table. Traders price nearly 67% probability of a Fed hike in December, per the CME FedWatch tool. The Fed's first decision under new chair Kevin Warsh is due next week. Higher rates bode poorly for non-yielding gold.

Diane Swonk, chief economist at KPMG U.S., said on X: "Warsh's colleagues are expected to give him a grace period as everybody gets to know each other. He left the Fed as Governor in 2011 but does know many in the system still. The narrative on inflation is that it was becoming stickier ahead of the conflict. The data supporting that narrative is getting stronger. It is a very different environment than Warsh thought he would enter."

She added: "We continue to expect two rate hikes in the back half of the year and Fed is forced to more directly attack inflation."

Ross Norman, independent analyst, said: "Gold is clearly significantly oversold just now, and it remains to be seen whether this is a recovery as such or simply short positions taking profit." Elevated crude oil prices can accelerate inflation and keep rates higher for longer, limiting gold's upside.

$4,240 is the rebound level that tests whether the six-month low was a bottom or a pause. A sustained hold above $4,200 allows short-term recovery toward $4,300. Failure to hold $4,100 — the level Ilya Spivak flagged earlier — opens $3,500 into year-end.

67% is the Fed-hike probability that caps the gold bounce. The June 17 Warsh press conference is the calendar event. Watch whether the new chair signals two hikes in H2 as Swonk expects, or whether he maintains a grace-period dovishness that gives gold room.

The Iran deal is the geopolitical clock. Trump's "Time and place of the signing to be announced shortly" is the promise. The naval blockade remaining in force is the caveat. Oil sliding on the headlines helps gold. Oil staying elevated on blockade reality hurts it.

The PPI and CPI prints are the macro reality. Inflation at three-year highs with a strong labor market means the Fed has cover to hike. Gold's recovery is a short-covering bounce, not a trend reversal — until the rate path changes.