The fragile two-week ceasefire between the US and Iran, brokered by President Trump, marks a pivotal shift in gold's trajectory after weeks of war-induced turmoil. Since the Middle East conflict erupted in late February, gold had plunged nearly 10% as investors liquidated holdings to cover losses elsewhere, overriding its traditional safe-haven status. Equities and gold moved in lockstep amid spiking energy prices and inflation worries that prompted bond traders to price in steady or higher Federal Reserve rates-a stiff headwind for the non-yielding metal.
Trump's suspension of bombing, tied to reopening the Strait of Hormuz, triggered an immediate market recalibration. Oil prices tumbled below $100 a barrel, the dollar index dropped, and equities surged over 2%, creating tailwinds for gold priced in greenbacks. Bullion surged as much as 3.1% above $4,850, extending prior gains and signaling reduced odds of prolonged Strait disruptions. Strategists like Ahmad Assiri at Pepperstone note this reflects risk repricing rather than a full safe-haven revival, with the pause offering temporary relief but vulnerability to breakdowns.
Beneath the geopolitical pivot, enduring demand drivers reemerge. Central banks stayed net buyers in February despite economic fog and rising tensions, underscoring gold's role in diversification and de-dollarization strategies. Analysts at Merrill Lynch affirm that post-war shock, classic supports like institutional accumulation and portfolio hedging will reassert, with significant upside potential ahead. Fed officials' recent cautions on inflation versus growth slowdowns add nuance, potentially countering rate hike bets if global activity softens.
This interplay explains gold's resilience: war liquidated short-term positions, but ceasefire clarity unleashes underlying bids from banks and funds seeking ballast against volatility. Investors should watch Hormuz talks closely, as any snag could reignite haven flows, while steady central bank purchases provide a floor.