*see also: Trading Indicators for XAU/USD

On Wednesday, gold showed strong growth, reaching three-week highs. The reason is the two-week ceasefire agreement between the U.S. and Iran, which has dramatically changed market sentiment. XAU/USD traded around $4,737.00, having dipped from an intraday high of $4,857.00.

Ceasefire: The Main Driver of the Day

Late Tuesday night, less than two hours before Donald Trump's ultimatum expired, the parties reached a breakthrough. The U.S. president announced on Truth Social that he agreed to "suspend bombings and attacks on Iran for two weeks" on the condition that the Strait of Hormuz is opened immediately and safely. Iranian Foreign Minister Abbas Araghchi confirmed that safe passage through the strait would be ensured in coordination with Iran's armed forces.

News of the ceasefire triggered a chain reaction that favored gold:

• Weaker U.S. Dollar: Investors are mass-selling long positions on the American currency, which had previously been in demand as a safe haven. The U.S. Dollar Index (USDX) is trading around 98.80, down nearly 0.90% intraday. This makes gold cheaper for holders of other currencies.
• Plummeting Oil Prices: Oil prices have collapsed amid the reopening of the Strait of Hormuz. WTI fell by more than 10%, trading around $89.70. The decline in oil prices eases inflationary pressure and reduces the need for central banks to tighten monetary policy, which traditionally supports gold.
• Reevaluation of Fed Rate Expectations: The rollback in oil prices has prompted markets to reassess expectations regarding the trajectory of interest rates. Previously, amid the energy shock, markets anticipated prolonged high rates, which pressured gold. Now, the pause in the conflict rekindles hopes for a looser monetary policy.

On Wednesday, traders focused on the publication of the March FOMC meeting minutes.

Recall that at the March meeting, the Fed kept rates in the range of 3.50%–3.75% but demonstrated a nuanced hawkish bias. The updated dot plot indicated that some officials do not expect rate cuts this year, while one participant even suggested a potential rate hike in 2027.

Key Points to Watch in the Minutes:

• How concerned policymakers are about high inflation – do they view energy shocks as temporary or permanent?
• How confident are officials in the disinflation process?
• The balance of risks within the Committee: if members are more concerned about inflation than growth, this would confirm the prolonged maintenance of high rates.

Any hints that the Fed is prepared to ease policy earlier will provide additional support for gold. Hawkish signals, on the other hand, could limit growth.

Caution: The Fragility of the Ceasefire

Despite the positive market reaction, economists remain cautious. It is unclear whether this will be a prologue to lasting peace or merely a two-week pause before a new round of conflict.

Key Risks:

• Iran has not officially confirmed either the ceasefire conditions or its readiness to restore navigation through the strait.
• Several of Tehran's demands (the withdrawal of U.S. troops from the region and reparations) remain unacceptable to the White House.
• Any breakdown in negotiations in Islamabad could lead to immediate escalation and a new spike in oil and gold prices.

Scenario A (Bullish for XAU/USD): Consolidation Above $4,780.00-$4,800.00

This scenario will materialize if negotiations proceed successfully, the dollar weakens sustainably, and signals from the Fed indicate a readiness to ease policy.

Targets: A stable breakout above the 50-day EMA ($4,780.00) will open the way to $4,900.00, followed by the psychological level of $5,000.00. The mid-term target will also become the level of $5,200.00.

Scenario B (Bearish for XAU/USD): Break Below $4,666.00

This could occur in the event of a breakdown in negotiations, resumption of military actions, and a return to hawkish expectations regarding Fed policy.

Targets: A breach of $4,666.00 (200 EMA on the hourly chart) will open the path to $4,460.00 (144 EMA on the daily chart), and then to $4,270.00 (200 EMA on the daily chart)-$4,125.00 (50 EMA on the weekly chart).

Conclusion

The two-week ceasefire between the U.S. and Iran has sent the dollar and oil prices tumbling, rekindling interest in the precious metal. The key zone of $4,666.00-$4,850.00 will be the arena for a decisive battle in the coming days.

The irony of the current moment, as noted by economists, is that gold paradoxically fell during the acute phase of the conflict—because the energy shock caused by the war led markets to price in a tighter Fed policy. Now, the ceasefire weakens this mechanism, allowing gold to recover what it lost.

In any scenario, volatility will remain high. Investors should closely monitor developments surrounding the negotiations in Islamabad—the outcome of the meeting on Friday will determine whether the current rise in gold is the beginning of a long-term recovery or merely a temporary respite within a downward trend.