PRECIOUS-Gold climbs to near three-week high after US, Iran agree to ceasefire

By Ishaan Arora

April 8 (Reuters) - Gold rose to a near three-week high on Wednesday as oil prices and the dollar fell sharply after the U.S. and Iran agreed to a two-week ceasefire.

Spot gold XAU= was up 2% at $4,795.28 per ounce, as of 1123 GMT. It rose more than 3% earlier in the session to its highest level since March 19.

U.S. gold futures GCcv1 for June delivery gained 3% to $4,822.70.

The United States and Iran have agreed to a two-week ceasefire, subject to Iran's agreement to pause its blockade of oil and gas supplies through the Strait of Hormuz, Trump said.

Oil prices fell more than 13%, below $100 a barrel, while the dollar sank to its lowest level in a month on the ceasefire deal.USD/O/R

"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 UBS analyst Giovanni Staunovo.

Gold has fallen 10% since the U.S. and Israel launched attacks against Iran on February 28. Though the metal is viewed as an inflation hedge, higher interest rates weigh on the non-yielding asset.

Investors now see a 43% chance of at least one rate cut by year-end compared with 14% a day prior, according to CME's FedWatch Tool. They now await minutes of the U.S. Federal Reserve's March policy meeting later in the day. FEDWATCH

Stocks and bonds surged, but beyond the immediate relief investors were keen to see whether the ceasefire leads to a broader resolution before placing major bets. MKTS/GLOB

Despite the ceasefire agreement, an oil refinery on Iran's Lavan Island was targeted on Wednesday, while Saudi Arabia's East-West oil pipeline was also hit.

"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 said.

Spot silver XAG= jumped 5.9% to $77.22 per ounce, platinum XPT= gained 5.4% to $2,063.50 and palladium XPD= surged 8.3% to $1,592.40.