Gold Rebounds as US-Iran Peace Talks Ease Inflation Fears

Bullion-backed exchange-traded funds added approximately 25 tonnes in April, reversing 94 tonnes of outflows recorded in March. This shift in institutional positioning coincided with a 1% rise in gold prices to nearly $4,839 per ounce on April 16. The rally recovered a significant portion of the 8% decline in gold prices that began when the conflict started on February 28, a period marked by liquidity-driven selling to cover margin calls.

The rebound follows an in-principle agreement between the United States and Iran to pursue diplomacy after inconclusive talks in Pakistan over the weekend of April 12-13. President Donald Trump stated the nearly seven-week conflict was "close to over." This diplomatic progress eased market concerns that energy price spikes would drive sustained inflation, which typically pressures non-yielding assets like bullion.

While gold rose, Brent crude oil prices remained above $96 per barrel, though they moderated enough to support the bullish mood for precious metals. This stability is partly attributed to the specific nature of US military actions. Joint Chiefs of Staff Chairman Dan Caine clarified that the US Navy is enforcing a blockade of Iranian ports and coastline, not the Strait of Hormuz, through which 20% of global oil transit flows. Since the blockade began on April 11, 13 ships have been turned back without any boardings occurring.

Despite the rally, structural headwinds remain. The swap market prices Federal Reserve rates to remain stable through 2026, a view reinforced by St. Louis Fed President Alberto Musalem and Cleveland Fed President Beth Hammack. Additionally, Trump has threatened to fire Fed Chair Jerome Powell and pursue a Justice Department probe into the central bank chief, creating institutional uncertainty regarding monetary independence. Gold recovered most of the prior session's losses to close at $4,808 per ounce.