Gold prices surged more than two percent on Wednesday as falling oil prices eased concerns about persistent inflation, following reports that Donald Trump is pursuing negotiations with Iran to de-escalate tensions in the Middle East.
Spot gold rose 2.56 percent to US$4,588 per ounce, while U.S. gold futures for April delivery climbed over four percent to US$4,597.70 per ounce, reflecting renewed investor appetite for the safe-haven asset.
The rally came as oil markets tumbled after Trump signalled a potential diplomatic breakthrough with Tehran. Speaking at the White House, the U.S. president said Washington was “in negotiations right now” with Iran and suggested the country was open to reaching a deal, even as Iranian officials denied direct talks were taking place.
Trump added that he had stepped back from a recent threat to strike Iranian energy infrastructure, citing progress in discussions. “They’re talking to us, and they’re talking sense,” he said, indicating a possible shift toward diplomacy.
Oil prices reacted sharply to the remarks. International benchmark Brent crude dropped around six percent to $98.31 per barrel, while U.S. West Texas Intermediate crude fell roughly five percent to $87.65. The decline in energy prices helped dampen inflation expectations, a key factor supporting gold’s upward movement.
Lower inflation typically reduces the likelihood of aggressive interest rate hikes, making non-yielding assets such as gold more attractive to investors. The U.S. dollar also weakened slightly, further boosting demand for bullion by making it cheaper for holders of other currencies.
Despite Wednesday’s gains, gold remains about 17 percent below its late-January peak, underscoring the volatility that has characterised the market in recent months.
Analysts say the earlier pullback was driven by rising expectations of higher interest rates and broader market turbulence, which prompted investors to shift away from gold-backed exchange-traded funds. During periods of financial stress, investors may also liquidate gold holdings to meet margin calls, putting additional pressure on prices.
Investment bank Goldman Sachs said the recent correction in gold prices was largely in line with historical trends and reflected a degree of market “normalisation” after an extended rally.
The bank’s co-head of global commodities research, Daan Struyven, noted that gold prices can overshoot underlying fundamentals during periods of uncertainty, before stabilising as market conditions improve.
However, Goldman Sachs maintained a bullish long-term outlook for the precious metal, forecasting prices could rise to as high as $5,400 per ounce by the end of the year.
The projection is underpinned by sustained demand from central banks, which have been increasing gold reserves as part of efforts to diversify away from traditional reserve assets and hedge against geopolitical and financial risks.
Central bank buying has emerged as a key pillar of support for gold in recent years, particularly as global tensions and economic uncertainties persist. Countries seeking to reduce reliance on major currencies have turned to gold as a stable store of value.
Market watchers say the trajectory of gold prices in the coming months will depend on a combination of factors, including interest rate expectations, geopolitical developments, and the strength of the U.S. dollar.
For now, easing oil prices and the prospect of reduced geopolitical tensions appear to have given gold a fresh boost, even as underlying market uncertainties remain.
