Gold Surges to Three-Week Peak as Ceasefire Deal Boosts Market Sentiment
Gold prices surged to a near three-week high on Wednesday as markets welcomed news of a U.S.-Iran ceasefire agreement. Spot gold rose 1.7% to $4,783.78 per ounce, while U.S. futures for June delivery climbed 2.7% to $4,812.60. The precious metal had earlier gained over 3% to reach its highest level since March 19.
The ceasefire deal, announced by President Trump, includes a two-week pause in hostilities, contingent on Iran halting its blockade of oil and gas shipments through the Strait of Hormuz. The agreement came despite an attack earlier in the day on an oil refinery on Iran's Lavan Island.
Market reaction was swift. Oil prices plunged more than 13%, falling below $100 a barrel, while the U.S. dollar hit a one-month low. Analysts attributed gold's rally to a combination of a weaker dollar, lower oil prices, reduced inflation expectations, and increased odds of Federal Reserve rate cuts.
"The weaker dollar is supporting gold, but essentially it is also supported by lower oil prices, lower inflation and increased rate cut expectations after the ceasefire announcement," said Giovanni Staunovo, analyst at UBS.
Gold has fallen 10% since the U.S. and Israel launched attacks on February 28. While the metal is traditionally seen as an inflation hedge, higher interest rates have weighed on the non-yielding asset. Following the ceasefire news, investors now see a 43% chance of at least one rate cut by year-end, up from 14% a day earlier, according to CME's FedWatch Tool.
Investors are now awaiting the minutes from the U.S. Federal Reserve's March policy meeting later in the day. While stocks and bonds surged on the ceasefire news, many investors remain cautious, seeking further signs of a broader resolution before making major bets.
"We continue to retain a constructive outlook for gold targeting a price of $5,900/oz by the end of the year, driven by diversification demand as a result of rising debt levels and lower real interest rates," Staunovo added.
Other precious metals also rallied. Spot silver jumped 5.6% to $77.02 per ounce, platinum gained 5.1% to $2,058.10, and palladium added 4.5% to $1,536.30.
