May 29 (Reuters) - Gold gained on Friday on hopes of a potential U.S.-Iran ceasefire, but prices were on track for a third straight monthly decline as concerns about energy-driven inflation bolstered expectations of higher interest rates.
Spot gold was up 0.9% at $4,532.03 per ounce, as of 1151 GMT. Bullion fell to a two-month low of $4,365.76 on Thursday, but closed higher. The metal has fallen around 2% so far this month.
U.S. gold futures for August delivery rose 0.7% to $4,562.60.
"Gold remains negatively correlated to oil, which impacts inflation and monetary policies. Lower oil prices reduces the probability of rate hikes, which is positive for gold," said UBS analyst Giovanni Staunovo.
Oil futures fell more than 1% and were on track for their steepest weekly decline since early April, after reports that the U.S. and Iran reached an agreement on Thursday to extend their ceasefire and lift restrictions on shipping through the Strait of Hormuz.
However, U.S. President Donald Trump is yet to approve the agreement and Iranian state media said it had not been finalised.
U.S. inflation increased at its fastest pace in three years in April, driven by higher energy prices due to the Iran war. The surging prices cemented economists' views that the Federal Reserve would hold interest rates unchanged well into next year, with some even expecting a rate hike by the end of this year.
While gold is considered a hedge against inflation, the non-yielding asset tends to come under pressure in high-interest-rate environments.
"May 2026 marked a period of consolidation across global markets following a turbulent first quarter. While geopolitical tensions and inflation concerns continued to influence sentiment, easing safe-haven demand and a firmer interest-rate outlook pressured precious metals during the month," precious metals trading firm Rotbart & Co wrote in a client note.
Spot silver was steady at $75.61 per ounce and platinum lost 0.1% to $1,920.75, while palladium gained 0.8% to $1,378.67. Platinum and palladium were headed for monthly losses, while silver was on track for a monthly gain.
Reporting by Anjana Anil in Bengaluru; Editing by Leroy Leo
