Gold prices edged lower on Thursday, investors weighed a steady dollar and elevated government bond yields against hopes for an imminent resolution to the Iran war.

By 05:33 ET (09:33 GMT), spot gold had fallen by 0.2% to $4,536.09 an ounce, while gold futures were down by 0.5% at $4,536.01 an ounce.

Optimism has been swirling around a possible deal to end the more than two-month war between the U.S. and Iran. President Donald Trump said the U.S. was in the "final stages" of a potential draft peace agreement, although he raised the specter of a re-escalation in hostilities, warning that "we’re going to do some things that are a little bit nasty" should a deal not be reached.

Iran, for its part, has said that it is reviewing Washington’s most recent position on concluding the conflict. 

Investors are particularly hunting for any indications that a deal could be made to reopen the Strait of Hormuz, a vital waterway off of Iran’s southern coast which has been all but closed to tanker traffic since the start of the war in late February. Shipping data in media reports earlier this week indicated that some vessels have been able to traverse the conduit in recent days. 

Brent crude futures, the global oil benchmark, were last trading lower at $103.97 a barrel, after having dropped from around $110 a barrel in the wake of Trump’s comments. Still, the contract is well above pre-war levels of $70 a barrel.

Worries have abounded that a prolonged conflict in the Middle East could spur on an energy-fueled inflation wave around the world, which may, in turn, force global central banks to consider interest rate hikes.

Non-yielding assets like gold tend to underperform in elevated rate environments.

Meanwhile, a shift into the U.S. dollar as a safe haven asset during the crisis has further taken some of the shine off of gold’s appeal. Some investors have viewed the greenback favorably, buoyed by the belief that the U.S., as a major energy exporter, could be relatively insulated from the oil price spike. A stronger dollar can make gold more expensive for overseas buyers.

Other precious metals also fell, cutting short a limited recovery this week. Spot platinum declined 0.3% to $1,949.70/oz, while spot silver fell 0.6% to $75.4065/oz. 

"Base metals are starting the morning on a cautious footing as markets continue to balance shifting geopolitical signals with a softer macro backdrop," analysts at Britannia Global Markets said in a note.