Gold Gains as Investors Weigh Prospects of Iran Conflict De-escalation

Gold Prices Rebound Amid Geopolitical Signals

Spot gold gained 1.2% to $4,725.12 per ounce on Wednesday, while U.S. gold futures for April delivery rose 1.5% to $4,715.70. The move came after President Trump said that the war with Iran could wind down in weeks and that Tehran did not need to make a deal as a precondition for the conflict to ease.

Trump said he would provide an update on Iran in an address at 9 pm EDT on Wednesday (0100 GMT on Thursday). Market participants remained cautious about interpreting his remarks as a clear turning point in the conflict.

“Market remains cautious about over-interpreting the de-escalation remark as a clean pivot… We've already seen multiple rounds where talks appeared constructive before stalling," said Christopher Wong, a strategist at OCBC.

Despite Wednesday’s rise, gold remains under pressure after falling more than 11% in March, its steepest monthly decline since October 2008. The recent slide has been driven by elevated oil prices, which have fuelled inflation concerns and expectations of a more hawkish monetary policy response.

Inflation, Rates, and Oil Keep Upside in Check

Oil prices gained even as investors considered the possibility of de-escalation in the Iran conflict, with infrastructure damage expected to keep supplies tight. Higher oil prices have reinforced inflation concerns, which in turn affect expectations for interest rate policy.

The U.S. dollar retreated from recent highs, making bullion relatively more affordable for holders of other currencies and providing some support to gold. However, analysts noted that the potential for higher interest rates is limiting further price appreciation.

“The upside (to gold prices) is being limited due to the fact that interest rates can move higher if inflationary expectations reignite,” said Marex analyst Edward Meir. Traders have almost completely priced out any chance of a U.S. rate cut this year, compared with expectations of about two cuts before the war.

While gold is often used as a hedge against inflation and geopolitical risk, higher interest rates reduce the appeal of non-yielding assets such as bullion. Wong of OCBC noted that if geopolitical tensions de-escalate further, expectations for Federal Reserve easing could return, allowing real yields to ease and “providing support for gold.”

FAQ

Why did gold prices rise on Wednesday?
Gold prices rose as investors reacted to comments from U.S. President Donald Trump suggesting the war with Iran could wind down in weeks, alongside a weaker U.S. dollar, which made bullion more affordable for holders of other currencies.

How did recent performance in gold compare historically?
Gold fell more than 11% in March, marking its steepest monthly decline since October 2008, amid elevated oil prices and rising expectations of a hawkish monetary policy response.

How are interest rate expectations affecting gold?
Traders have largely priced out any U.S. rate cuts this year, and the possibility of higher interest rates is limiting the upside for gold, as higher yields reduce the relative attractiveness of non-yielding bullion.