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Update: Gold Rises Off a Seven-Month Low on Hopes a U.S.-Iran Peace Deal is Near

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(Updates prices.)

Gold traded sharply higher midafternoon on Friday, rising off a seven-month low on expectations Iran is ready to sign a peace deal with the United States, promising to lower the high oil prices that have raised inflation and boosted the U.S. dollar and bond yields.

Gold for July delivery was last seen up US$124.80 to US$4,238.80 per ounce after falling to the lowest since Nov. 20 a day earlier.

The rise comes as U.S. President Trump on Thursday said he canceled planned attacks on Iran and said a peace deal with the country is near. Reports said a deal could be signed this weekend, however the Wall Street Journal said Iran has not yet agreed to the peace proposal, though Qatar's leader, Sheikh Tamim bin Hamad al-Thani, who is mediating talks, confirmed progress is being made on a agreement.

A deal could see the Strait of Hormuz reopen freeing up trapped supplies from the Persian Gulf nations that supplied about 20% of daily oil demand before the Strait was closed to shipping at the Feb. 28 start of the war, easing the high oil prices that have boosted inflation and threatened to force central banks to raise interest rates.

"Before the market can look beyond the next headline and refocus on longer-term supportive themes, investors need confidence that the inflation genie is being pushed back into the bottle. For that to happen, markets will need a peace agreement signed and endorsed by both sides," Saxo Bank wrote.

The dollar was lower, with the ICE dollar index last seen down 0.12 points to 99.74. Treasury yields rose, bearish for gold since it pays no interest. The U.S. two year note was last seen paying 4.087%, up 1.5 basis points, while the yield on the 10-year note was up 1.0 points to 4.482%.

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