US-Iran Truce. Gold Prices Return to $4,800, Is Now Still the Time to Buy?
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A ceasefire announcement triggered a rebound in precious metals, with gold surpassing $4,800. International oil prices significantly declined. Historically, gold is a safe-haven asset, but geopolitical risks increased dollar demand, pressuring gold. High oil prices also fueled inflation expectations, limiting Fed rate cut potential and supporting the dollar. The oil price crash weakened these pressures, allowing gold's recovery. The market now focuses on economic fundamentals and the Fed's rate path. Despite past volatility, structural drivers like central bank buying and de-dollarization trends support gold long-term. Traders are advised caution due to potential volatility.
TradingKey - On the evening of April 7 ET, Trump announced his agreement to a two-week ceasefire, sparking a recovery in precious metals, Spot Gold (XAUUSD) surpassed $4,800, with spot silver rising nearly 5%; meanwhile, international oil prices staged a nose-dive, with Brent crude futures dropping as much as 18% and WTI crude futures falling over 19%.
Why have gold prices returned to $4,800 as war risks ease?
Historically, gold has acted as a safe-haven asset, yet the recent conflict has not exhibited gold's safe-haven properties in the short term. On one hand, systemic risks from geopolitical tensions have caused liquidity demand to surge, driving demand for the U.S. dollar. The dollar's strength has weighed on dollar-denominated commodities, keeping gold under continuous pressure. On the other hand, gold's prior rally had detached from safe-haven fundamental logic; the short-term pullback instead better maintains gold's fundamental pricing.
[Market pricing for a June Fed rate cut has increased compared to a day ago, Source: www.cmegroup.com]
Furthermore, high oil prices pushed up inflation expectations, narrowing the Fed's room for rate cuts and driving Treasury yields higher, which supported the U.S. Dollar Index and pressured gold. Catalyzed by news of a two-week truce between the U.S. and Iran, oil prices crashed, directly weakening this chain of pressure. In reality, the gold price rebound is a "compensatory recovery" for the removal of dollar pressure triggered by the crude oil crash.
The ceasefire shifted market focus from military conflict back to economic fundamentals, and the Fed's interest rate path is precisely the core variable for gold pricing. The ceasefire agreement weakened inflation expectations, and the market repriced for the Fed to initiate a rate-cut cycle, thereby increasing the appeal of dollar-denominated assets.
Is the safe-haven rationale for gold still valid?
After the Middle East powder keg was ignited, gold, instead of continuing its rally, fell from a high of $5,400 after the conflict broke out to a low of $4,100. This is not a failure of gold's safe-haven properties, but rather the result of the triple resonance of oil prices, interest rates, and the U.S. dollar.
Rising oil prices push up inflation expectations, squeezing the Federal Reserve's room for rate cuts and driving Treasury yields higher, which in turn supports the U.S. Dollar Index; meanwhile, from the perspective of the petrodollar system, rising oil prices also increase global demand for dollars. Consequently, gold's safe-haven logic was "mistakenly caught in the crossfire."
The "abnormal" trend after the ceasefire took effect on April 8 proves precisely that the "blockage" in safe-haven logic is being cleared.
Analysis from Guosen Securities reveals the essence of the rare negative correlation between gold and crude oil in the preceding period: a sudden spike in oil prices led to massive margin calls for global allocation funds on their energy short positions, and gold, as the only asset in the market with unrealized gains and sufficient liquidity, faced large-scale proactive liquidation.
Following the implementation of the ceasefire, liquidity pressure has eased significantly, and gold is returning from being a "liquidity ATM" to its essence as an "inflation hedge."
Is now still the right time to buy gold?
The two-week window brought by the ceasefire has provided the market with breathing room. Although the ceasefire signal offers a window for a tactical rebound, the trajectory of the conflict remains uncertain and short-term volatility is inevitable; traders are advised to maintain light positions and avoid chasing rallies or selling into dips.
From a long-term perspective, the structural logic supporting gold remains unchanged.
Macroeconomically, China has increased its gold reserves for 17 consecutive months, and the broader trend of central bank gold buying persists. Furthermore, the de-dollarization process continues to advance; the persistently high U.S. fiscal deficit remains a Sword of Damocles over the dollar's credit, and the Federal Reserve's easing cycle has been delayed but not terminated.
Emily Avioli, Vice President at Merrill, once noted: "Short-term challenges do not negate the structural forces that have bolstered gold in recent years. Once the hostilities in the Middle East end, these underlying demand drivers will reassert themselves."
This content was translated using AI and reviewed for clarity. It is for informational purposes only.
