Gold prices rose to a nearly three-week high on Wednesday as the market re-evaluated short-term risks, after US President Donald Trump agreed to suspend airstrikes and attacks targeting Iran for two weeks, thereby easing concerns about inflation due to energy prices.
Spot gold prices rose 2.5% to 4,810.41 USD per ounce at 2:45 PM Vietnam time. Earlier in the session, the precious metal at one point increased by more than 3%, to the highest level since March 19.
US gold futures for June delivery rose 3.5% to $4,847.70 per ounce.
Mr. Trump said Washington has agreed to suspend the offensive for two weeks and has received a 10-point proposal from Iran, which he described as a feasible basis for negotiations.
These statements were made after he warned Tehran to reopen the Strait of Hormuz, otherwise it would face retaliatory measures from the US aimed at civilian infrastructure.
Mr. Nicholas Frappell, Global Organization Market Director at ABC Refinery, said that the market previously leaned towards the possibility of escalating conflict, but information about a two-week ceasefire reversed this expectation and supported gold prices.
The Iranian Supreme Security Council said that negotiations with the US will begin on April 10 in Islamabad, after the country sent a proposal through Pakistan, and emphasized that it does not mean the end of the war.
Rising energy prices can boost inflation and complicate interest rate policy decisions of central banks. Although gold is often seen as an inflation and instability hedging asset, the attractiveness of this precious metal tends to decrease in a high interest rate environment because it does not yield yields.
The market is currently awaiting minutes of the March monetary policy meeting of the US Federal Reserve expected to be released on the same day.
Gold prices, despite a positive start to the year, have fallen more than 8% since the outbreak of conflict with Iran on February 28.
Mr. Tai Wong, an independent metal trader, said that the current increase is a quick reaction to positive information and still needs to monitor whether Iran fulfills its commitments. According to him, important technical milestones for gold are about 4,930 USD and 5,000 USD per ounce, while for silver it is in the 80 - 81 USD per ounce range.
In other metals, silver rose 5.5% to $76.91 per ounce, platinum rose 3.9% to $2,034.65 and palladium rose 4.9% to $1,541.71 per ounce.
