Gold steadied and clawed back earlier losses Monday, trading up 1.08% to $4,525.34 per ounce as diplomatic signals out of the Middle East offered tentative relief, even as the broader picture remained anything but settled.Spot silver also gained, rising 1.59% to $76.17/oz, tracking gold's modest recovery.The session's tone was set by competing headlines from Washington and Tehran. President Donald Trump took to Truth Social to claim progress on Lebanon, saying both Israel and Hezbollah had agreed to halt hostilities and noting a productive call with Israeli Prime Minister Benjamin Netanyahu. That was enough to knock oil off its earlier highs — Brent crude for August delivery fell 1.7% to $93.35 per barrel, and WTI for July dropped by a similar margin to $90.65/bbl — which in turn dialed back some of the inflation anxiety that has been the dominant headwind for gold since the conflict began in late February.But Iran complicated the picture. Iranian state media and the Revolutionary Guard in Tehran reported that indirect communications with the U.S. had been suspended in protest over Israeli military operations in Lebanon, adding that the ceasefire could collapse entirely if the strikes don't stop. The Lebanese Embassy in Washington, meanwhile, stated that Hezbollah had accepted the terms of a U.S. proposal "for a mutual cessation of attacks," with Israeli strikes on Beirut's southern suburbs stopping in exchange for Hezbollah refraining from attacks against Israel — a deal that would then expand to cover all Lebanese territory.Set OilPrice.com as a preferred source in Google here."The optimism surrounding negotiations between the US and Iran aimed at ending the standoff in the Strait of Hormuz faded over the weekend," ActivTrades analyst Ricardo Evangelista said in a note. "As a result, energy prices rebounded, reviving inflation concerns and reinforcing hawkish Federal Reserve expectations."That's the core of gold's problem right now. The metal hit a record near $5,600/oz in January and surged 60% through all of 2025, but the conflict has erased much of that momentum — prices have tumbled as much as 25% peak-to-trough since late February. Higher oil prices feed inflation, inflation keeps the Fed on hold or worse, and gold, which pays no yield, loses its appeal relative to rate-bearing assets. Traders are now pricing in a 39% chance of a Fed rate hike by December, according to CME Group's FedWatch tool.Even so, longer-term targets remain bullish. JPMorgan is forecasting average gold prices of $5,000/oz, while Goldman Sachs has set a year-end target of $5,400/oz. Year-to-date, the metal is still up 4.5%, though that gap to earlier highs underscores just how much the geopolitical backdrop has shifted the calculus.Treasury yields moved lower Monday as traders dialed back some of the worst-case scenarios that had been building into markets. But investors appeared reluctant to make large directional bets, with most waiting for confirmation that any ceasefire holds.The near-term will likely be driven by U.S. labor data. April JOLTS job openings are due this week, with markets watching to see if vacancies continue to slow from the previous reading of 6.866 million. Friday's May nonfarm payrolls report is the bigger event — consensus forecasts call for job growth around 95,000, with the unemployment rate expected to hold at 4.3%. A softer print would likely ease rate hike pressure and offer gold some breathing room. A strong one gives Fed hawks ammunition.New Fed Chair Kevin Warsh leads the central bank's first meeting June 16-17, and market participants are watching closely to see whether the institution stays hawkish or begins to signal any flexibility as labor market data accumulates.For now, gold is caught in the middle. Geopolitical tension keeping a floor under prices, rate hike fears capping the ceiling.By Michael Kern for Oilprice.com More Top Reads From Oilprice.comOil Pulls Back as Trump Claims Lebanon Ceasefire Deal Is Within ReachVenezuela Oil Exports Hit 7-Year HighChina Solar Makers Launch Space Energy Development Alliance