Gold prices rose on Wednesday as lower oil prices, following a U.S. extension of a ceasefire with Iran, eased fears of an inflation spike and prolonged high interest rates.
Spot gold rose 1.1% to $4,762.22 per ounce, as of 0615 GMT, after falling to its lowest level since April 13 on Tuesday.
U.S. gold futures for June delivery gained 1.3% to $4,781.
U.S. President Donald Trump said he would indefinitely extend the ceasefire with Iran to allow for further peace talks, hours before it was set to expire.
Trump's announcement appeared to be unilateral, and it was not immediately clear whether Iran or U.S. ally Israel would agree to extend the ceasefire, which began two weeks ago.
"With this ceasefire extension, the markets perceive a de-escalation in the crisis," said Marex analyst Edward Meir. "If the ceasefire ends and hostilities resume, we will see the dollar strengthen, oil and interest rates go up and that should pressure (gold) prices."
Stocks gained, the dollar eased and oil prices turned lower following the ceasefire extension.
Higher crude prices can stoke inflation by raising transportation and production costs. While gold is considered an inflation hedge, high interest rates make yield-bearing assets more attractive, weighing on the bullion's appeal.
"Price action remains at the mercy of Middle East ceasefire headlines and liquidity needs," analysts at Standard Chartered said in a note.
"While we note that the recent tick higher in prices has been fragile and is at risk of a short-term correction, we continue to expect (precious metals) prices to recover and gold in particular to retest record highs."
Meanwhile, Federal Reserve chief nominee Kevin Warsh said on Tuesday he had made no promises to Trump about cutting interest rates, as he tried to assure U.S. senators mulling his confirmation to lead the central bank that he would act independently of the White House while pursuing broad reforms.
Spot silver rose 2.2% to $78.38 per ounce, platinum gained 2.1% to $2,079.64, and palladium was up 2.6% at $1,573.34. - Reuters
