Spot gold rose 0.3% to settle at $4,719.35/oz, after hitting a session high at $4,856.00/oz

Gold prices retreated from a three-week high on Wednesday but were still in the green after U.S. President Donald Trump agreed to a temporary ceasefire with Iran.

Spot gold rose 0.3% to settle at $4,719.35/oz, after hitting a session high at $4,856.00/oz.

Trump in a social media post on Tuesday said that he would suspend military action against Iran for two weeks, adding that the U.S. had already achieved its core military objectives.

Iran also signalled a conditional willingness to de-escalate, saying safe passage through the strait would be possible during the ceasefire period, provided hostilities were halted and vessels coordinated with Iranian authorities.

The ceasefire is conditional on Iran ensuring the safe reopening of the strait, a key pathway for nearly 20% of world’s oil flows.

Markets reacted swiftly to the ceasefire news, with oil prices slumping by more than 12% and risk assets rallying, while the dollar came under pressure.

The U.S. dollar index dropped, making bullion cheaper for holders of other currencies.

Despite bullion’s traditional appeal as a safe-haven asset, it had come under pressure last month as oil prices surged sharply, stoking inflation concerns and raising expectations that the U.S. central bank could keep interest rates higher for longer. Gold tends to underperform in elevated rate environments.

Market participants were also looking ahead to the U.S. March consumer price index (CPI) report due on Friday, which is expected to provide one of the first clear indications of the impact of the recent surge in energy prices due to the war.

Economists expect headline inflation to have accelerated on a monthly basis, driven largely by higher fuel costs, potentially complicating the outlook for U.S. central bank policy.