Gold climbs as diplomacy tempers geopolitical risk, shifting bullion’s price driver from safe-haven flows to policy expectations

Gold climbed 0.7% to $4,773.26 per ounce Tuesday as diplomatic overtures between the U.S. and Iran reshaped the forces driving bullion prices — not by reigniting safe-haven demand, but by tempering the very risks that had undermined it. The move reversed two days of losses and briefly lifted gold to $4,796, as Iranian representatives signaled willingness to negotiate and U.S. officials acknowledged the opening. President Donald Trump confirmed Tehran had reached out to his administration seeking a deal, while Iranian President Masoud Pezeshkian affirmed readiness to continue talks. U.S. Vice President JD Vance, who led weekend discussions in Pakistan, described progress as tentative, with outcomes hinging on decisions in Tehran. The ceasefire window expires next week.

Despite Washington’s enforcement of a maritime blockade in the Strait of Hormuz — a strategic escalation — markets priced in de-escalation. The dollar index fell for a seventh straight session, its longest losing streak in 24 months, lifting dollar-denominated gold. Oil retreated below $100 per barrel, easing inflation fears that had pressured the metal since hostilities began. In late February, conflict-driven supply concerns spiked energy prices, amplifying expectations the Federal Reserve would hold or tighten rates. Non-interest-bearing assets like gold suffer under higher rates, which increase the opportunity cost of holding them.

Yet the current rebound stems less from flight-to-safety dynamics than from recalibrated policy views. As Justin Lin, investment strategist at Global X ETFs Australia, noted, gold is now responding to de-escalation hopes more than to conflict anxiety. That shift matters: the Fed’s path remains uncertain, with money markets pricing in less than a 20% chance of a rate cut by December. Without monetary easing in view, gold’s upside faces constraints. The metal has still lost about 10% since fighting erupted, as investors sold bullion to cover losses elsewhere during the initial liquidity squeeze. Silver gained 2.5% to $77.51, while platinum and palladium also rose, reflecting broad strength in the sector. The March Producer Price Index, due Tuesday, could recalibrate inflation assumptions — but for now, the metal’s fate rests not on war, but on the narrowing odds of peace.