The spot gold market experienced significant volatility on Thursday, with prices surging more than 3% in a single day to close at $4,210.72 per ounce, a gain of $139.43. Earlier in the session, gold touched a six-month low of $4,023 before rebounding sharply. This movement was primarily driven by US President Trump's sudden announcement canceling planned military strikes against Iran. Concerns over escalating geopolitical conflicts eased, diminishing expectations that rising oil prices would fuel inflation and keep interest rates elevated.

Speaking from the Oval Office, Trump stated that the US has reached a settlement agreement with Iran, with documents awaiting finalization and expected to be formally signed within the coming days. Reports suggest the signing could take place in Europe as early as this weekend, with Vice President Vance representing the US side. Upon effectiveness, the Strait of Hormuz will reopen immediately. Trump noted that the terms have been approved by the US, Israel, and several Middle Eastern nations. This stance marks a sharp contrast to his earlier hawkish rhetoric on social media threatening severe strikes on Iran and taking control of key energy facilities.

Buoyed by this news, the US Dollar Index fell 0.42% to 99.66, with the softer dollar further benefiting gold prices. Market expectations for a Federal Reserve rate hike also cooled. Data indicates the probability of a Fed rate hike in December dropped from 69% to 62%. Investors are awaiting next week's Federal Reserve meeting, with markets expecting officials to keep rates unchanged. On the economic data front, US initial jobless claims for the week ending June 6 rose to 229,000, higher than expected. Additionally, the US Producer Price Index for May rose more than anticipated, while the Consumer Price Index climbed at the fastest pace in three years, driven primarily by sharp increases in energy-related product prices.

Commodity strategists noted that while news of an agreement has emerged multiple times before without materializing, if this instance proves true, it will help gold prices recover from recent lows. Technically, after breaking below previous lows, gold prices have rebounded. The Relative Strength Index indicates an oversold condition but has not yet fallen into the 20 region. On the upside, gold needs to reclaim the 200-day simple moving average at $4,443 to have a chance at testing the $4,500 level. On the downside, if gold breaks below $4,000, the next key support level is seen near $3,886.