Gold prices edged higher in Asian trading as investors reacted to reports of a potential U.S.-Iran peace agreement. Spot gold rose 0.4% to $4,586.39 per ounce, buoyed by hopes that de-escalation could reduce oil price pressures and ease inflation concerns.

President Trump's decision to pause planned military action against Iran came at the request of Gulf leaders, creating diplomatic space for negotiations. The move signals a shift toward diplomatic resolution that could reshape Middle East tensions and energy markets.

Lower oil prices from reduced geopolitical risk would ease inflationary pressures, potentially limiting central banks' urgency to raise interest rates. This benefits gold, which competes poorly against interest-bearing assets when rates climb. The precious metal's safe-haven appeal strengthens when rate-cut expectations emerge.

The market reaction reflects investor preference for diplomatic solutions over military conflict, particularly given the potential impact on global energy supplies and inflation trajectory.