Gold climbed sharply on Wednesday, April 8, after the United States and Iran agreed to a two-week ceasefire, triggering a simultaneous collapse in oil prices and a weakening of the US dollar that combined to lift bullion by more than 3 percent.
Spot gold climbed as much as 3.2 percent to above US$4,850 an ounce, building on a 1.2 percent gain in the prior session. The move came as financial markets absorbed the overnight announcement that both sides had agreed to halt hostilities pending negotiations in Islamabad on Friday.
The ceasefire delivered two of the conditions most favorable to gold. Oil prices fell steeply, reducing near-term inflation expectations and easing pressure on central banks to maintain or raise interest rates. At the same time, investors moved into US Treasuries, with yields on 10-year and 20-year debt falling 9 basis points, further loosening the monetary policy outlook that had weighed on bullion in recent weeks.
Because gold earns no interest, it tends to underperform when bond yields are high or rising. Lower yields reduce that competitive disadvantage, making the metal more attractive.
The US dollar also weakened broadly on the ceasefire news, providing a further tailwind. Since gold is priced in dollars, a softer greenback makes it cheaper for buyers using other currencies, typically supporting demand and prices.
War Premium Begins to Unwind
Despite Wednesday’s gains, gold has dropped approximately 9 percent since the conflict began at the end of February, having shed the exceptional war premium that built up as oil supplies were disrupted and inflation fears escalated.
Analysts cautioned against reading too much into Wednesday’s move. The ceasefire announcement eased immediate escalation fears but left significant uncertainties around oil shipments and broader geopolitical tensions intact.
Longer-term forecasts from major banks remain constructive. Firms including J.P. Morgan expect average gold prices near US$5,000 or higher later in 2026, supported by inflation risks and continued demand for diversification.
China Keeps Buying
Underlying demand from central banks remains a structural support. The People’s Bank of China (PBoC) purchased the most gold in more than a year in March, with its bullion holdings rising by 160,000 troy ounces and extending its buying streak to 17 consecutive months.
That institutional demand has been a key feature of gold’s longer-term rally. Gold has gained nearly 25 percent so far in 2026, building on an exceptional 64 percent jump in 2025, fuelled by robust central bank purchases, strong inflows into exchange-traded funds, and a shift toward looser US monetary policy.
Whether Wednesday’s jump proves durable will depend on how the ceasefire negotiations in Islamabad develop and whether oil prices sustain their decline, two variables that markets will watch closely over the next two weeks.
