Gold reversed a nine-session losing streak on Wednesday, March 25, climbing more than two percent as a softer United States dollar, easing oil prices, and cautious optimism over diplomatic progress in the Middle East conflict combined to revive demand for the precious metal.
Spot gold rose 2.1% to $4,568.29 an ounce, supported by a weaker dollar, signs of easing war tensions and falling crude oil prices. US gold futures for April delivery climbed 3.8% to $4,569.40 per ounce, while spot silver increased 3.8% to $73.94 per ounce.
The rebound came after one of the most turbulent stretches in gold’s recent history. Gold dropped 11% last week, posting its biggest weekly loss since 1983, with the metal down more than 14% since the Middle East war began. The conflict had weighed on the metal through an unusual channel: surging oil prices stoked inflation concerns, raising expectations of higher interest rates globally, which in turn pressured the non-yielding asset.
US President Donald Trump said on Tuesday the US and Iran are “in negotiations right now” and suggested Tehran is eager to make a peace deal, even as the Islamic Republic has denied it is in direct talks with Washington. Reports emerged that Washington had sent Iran a 15-point settlement proposal, with Israel’s Channel 12 citing sources as saying the US was seeking a month-long ceasefire to discuss the plan, which includes the dismantling of Iran’s nuclear programme, ceasing support for proxy groups, and the reopening of the Strait of Hormuz.
Oil prices sank about 5% on Wednesday on the ceasefire reports, with Brent crude futures falling to around $98 a barrel by midday in London, off session lows of $97.57. Falling crude prices eased near-term inflation expectations and reduced pressure on central banks to maintain or raise interest rates, creating a more supportive environment for gold.
Analysts noted that the dollar’s retreat was also central to the day’s move. Christopher Wong, a strategist at Overseas Chinese Banking Corporation (OCBC), said that as dollar strength eased, safe-haven demand for gold reasserted itself. “This reinforces the view that gold didn’t lose its safe-haven appeal. It was briefly crowded out by the USD, and now that pressure is easing,” he said. Wong added that near-term gold prices are likely to remain sensitive to US Federal Reserve (Fed) policy expectations, the dollar, and geopolitical developments.
Prior to Monday’s partial recovery, bullion had fallen for eight straight sessions as escalating Middle East tensions triggered fears about global inflation, reducing the likelihood of interest rate cuts and eroding appetite for assets like precious metals. A stronger dollar during the conflict also added to selling pressure, while a global liquidity crunch forced some investors to sell profitable gold positions to cover losses elsewhere.
Investor positioning has begun to shift in response. Bets on US Federal Reserve rate increases by December have been trimmed to around 16% from 25% the previous Friday, according to data from CME Group’s FedWatch tool, suggesting markets are pricing in a more accommodative outlook if the conflict eases.
Momentum indicators suggest that downside pressure is easing but not fully reversed, with the Relative Strength Index having rebounded from oversold levels below 30 to around 37, still reflecting some underlying selling pressure. Analysts have placed near-term resistance for gold near the 100-day simple moving average around $4,619, with the $5,000 level as the next significant psychological threshold.
