Gold Surges 2% as US-Iran Ceasefire Eases Inflation Fears

Gold prices rose nearly 2% to $4,790 per ounce on Wednesday, hitting their highest level since March 19, after the US and Iran agreed to a two-week ceasefire, reducing fears of energy-driven inflation. Trump stated that Washington had agreed to pause attacks for two weeks and received a "workable" 10-point proposal from Iran as a foundation for negotiations, while Tehran committed to keeping the Strait of Hormuz open to ensure safe vessel passage. Energy prices fell, prompting investors to revise their 2026 interest rate expectations. The Federal Reserve is expected to maintain borrowing costs this year, reversing earlier concerns that rising inflation could force a rate hike later this year. While gold is traditionally a hedge against inflation and uncertainty, its appeal tends to fade in a high-interest-rate environment due to its lack of yield. Since the Iran war began on February 28, bullion has declined by over 8%.

Gold jumped more than 2% to above $4,800 per ounce on Wednesday, extending recent gains after President Donald Trump delayed his planned strikes on Iranian civilian infrastructure by two weeks to finalize talks on a potential resolution to the war. Trump also said the US had received a 10-point proposal from Iran that he described as a “workable basis for negotiations,” with the two-week window allowing the potential agreement to be finalized and implemented. Additionally, Iran has agreed to reopen the Strait of Hormuz for two weeks provided all attacks are halted, adding that transit would need to be coordinated with Iran’s Armed Forces, while Israel has also reportedly assented to the temporary ceasefire. Gold has tumbled as much as 25% peak-to-trough since the conflict began, as a surge in energy prices fueled inflation concerns and reinforced a hawkish shift in central bank outlooks.

Gold prices stabilized below $4,650 per ounce on Tuesday as the market entered a cautious wait and see mode ahead of President Trump’s 8 p.m. ET deadline. This consolidation follows reports that Iran cut off direct communications with the United States in response to Trump's civilization threats though it continues to engage through mediators regarding a potential ceasefire. While gold traditionally thrives on geopolitical instability its safe haven appeal is currently suppressed by a dominant US dollar and rising Treasury yields fueled by stagflation fears. Although the US launched strikes on military targets at Kharg Island overnight the lack of a sustained rally suggests that investors are pricing in military escalation. Domestic support remains thin as the surge in oil to $116 per barrel reinforces expectations that the Federal Reserve will maintain tight monetary policy. Long term support is anchored by the People’s Bank of China which bought 160,000 ounces in March.