Gold prices rose after U.S. President Donald Trump and Iran agreed to a two-week ceasefire to finalize talks on ending the war that has upended global markets.

Bullion climbed to above $4,800 an ounce, extending a 1.2% gain from the previous session. Trump said in a social media post that he had agreed to suspend bombing less than two hours before a self-imposed deadline to wipe out Iran's "whole civilization," adding that the reopening of the Strait of Hormuz was a key condition for the pause. Iran said safe passage through the strait was "possible" for two weeks.

Oil plunged below $100 a barrel and the dollar also fell, supporting gold that's priced in the U.S. currency.ย Equities surged more than 2%.

Since the war in the Middle East began, bullion has traded largely in tandem with stocks, with its traditional haven appeal dimmed by some investors' need to cover losses elsewhere in their portfolios.

"Gold's push above $4,800 reflects a recalibration of risk, rather than a full regime shift," said Ahmad Assiri, a strategist at Pepperstone Group.

"The move higher suggests markets are now pricing in a lower probability of prolonged disruption, while still retaining a meaningful discount versus the pre-Iran setup."

Related: Why Trump Wants Magnets More Than Gold

Now in its sixth week, the conflict has driven a spike in energy prices and raised inflationary risks, making it more likely that central banks will delay cutting interest rates or even hike them.

Bond traders expect the Federal Reserve to keep borrowing costs steady through the rest of the year -- a headwind for non-yielding gold.

Gold has fallen almost 10% since the war began at the end of February.

A moderate recovery in recent days has been driven by hopes for a ceasefire, as well as expectations that a slowdown in global economic growth could act as a counter to bets on stable or higher borrowing costs.

The ceasefire came together with mediation from Pakistan.

Trump credited "conversations with Prime Minister Shehbaz Sharif and Field Marshal Asim Munir" as the basis for his decision. Iran's 10-point proposal -- which includes U.S. troop withdrawals from the region, sanctions relief, and a protocol for controlled passage through Hormuz -- was described by Trump as "a workable basis on which to negotiate."

On Tuesday, before the ceasefire was announced, a trio of Fed officials expressed concern over inflation and slowing growth.

Vice Chair Philip Jefferson described interest rates as broadly in a range that neither spurs nor restrains the economy, while Fed Bank of New York President John Williams said his outlook for underlying price pressures was largely unchanged.

Not everyone is ready to call it a durable shift.

"TACO is becoming less of a joke and more of a trading strategy," said Zavier Wong, market analyst at eToro. "Investors have seen enough last-minute pivots to know that a two-week deadline isn't necessarily what it seems."

By Michael Kern for Oilprice.com

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