Gold prices jumped more than 3% on Friday as investors seized a dip-buying opportunity following a pullback earlier this week, while closely monitoring the escalating conflict in the Middle East.

Spot gold rose 2.6% to $4,491.78 per ounce by 1:45 p.m. ET (1745 GMT), after climbing as high as $4,554.39 during the session. U.S. April gold futures settled 2.7% higher at $4,492.50. Analysts said the recent selloff, which took gold to a four-month low of $4,097.99 on Monday, created a strong buying opportunity.

"Prices went below the 200-day moving average…this is an incredible time to buy gold," said Daniel Pavilonis, senior market strategist at RJO Futures. He added that gold is likely to grind higher over the next few weeks, especially if tensions in Iran ease.

Oil prices remained above $110 per barrel even after U.S. President Donald Trump extended a deadline for Iran to reopen the Strait of Hormuz, following Tehran’s rejection of a 15-point U.S. proposal to end the conflict.

The war, now in its fourth week, has disrupted the Middle East region, sending energy and fertilizer prices soaring and fueling global inflation concerns. Higher inflation has shifted expectations for the Federal Reserve toward potential rate hikes, typically weighing on gold by raising the opportunity cost of holding the non-yielding asset.

Traders have priced out any U.S. rate cuts in 2026, according to CME Group's FedWatch Tool, a shift from earlier expectations of two cuts before the conflict began.

Despite the turbulence, Commerzbank raised its gold price forecast, lifting its year-end target to $5,000 per ounce from $4,900. The bank expects the Iran conflict to end in spring, which could ease current rate hike expectations and allow the Federal Reserve to resume rate cuts later this year, potentially lowering rates by about 75 basis points by mid-2027.

Other precious metals also gained: spot silver rose 2.2% to $69.54 per ounce, platinum increased 2.3% to $1,868.89, and palladium climbed 1.8% to $1,377.25.

The market remains cautious, with investors balancing geopolitical risks against central bank policies and inflation outlooks.