Gold climbed above $4,100 an ounce on Thursday, supported by a softer US dollar, though gains were capped as investors remained focused on escalating tensions in the Middle East and their implications for inflation and monetary policy.
The US military said it carried out fresh strikes on Iran on Wednesday, prompting retaliatory attacks on Kuwait and Bahrain and heightening regional tensions.
However, US President Donald Trump said Iran had reached out seeking a deal, tempering fears of a broader escalation.
Meanwhile, minutes from the Federal Reserve's latest meeting showed growing concern over inflation, with several policymakers seeing a case for a rate hike before rates were ultimately left unchanged last month.
Markets are now pricing in a 63% chance of a September rate hike.
Separately, HSBC lowered its average gold price forecast to $4,560 for 2026 from $4,864, and to $4,925 for 2027 from $5,000.