WASHINGTON (dpa-AFX) - After tumbling for two consecutive sessions, gold prices have climbed on Wednesday after U.S. President Donald Trump announced the extension of the ceasefire between the U.S. and Iran, which moderately revived market sentiments. The unresolved Hormuz Strait crisis capped the prices on the upside.
Front Month Comex Gold for 4,747.10-month delivery has edged higher by $27.50 (or 0.58%) to $4,747.10 per troy ounce.
Front Month Comex Silver for June month delivery has soared by $1.254 (or 1.63%) to $78.025 per troy ounce.
The two-week ceasefire announced on April 8 in the war between the U.S.-Israeli combined forces against Iran was set to expire on April 22.
The first round of peace talks held between the U.S. and Iranian delegations during this period nearly 12 days before ended without any agreement, prompting U.S. President Donald Trump to order U.S. forces to block all vessels transiting to and from Iranian ports across the Strait of Hormuz.
Already, immediately after the war began, Iran had shut the Strait of Hormuz. The near-total blockade escalated oil and energy supply-disruption concerns from the gulf to other countries, which drove up oil prices.
Consequently, inflationary pressures rose, with experts predicting a 'demand destruction' for crude oil.
Last weekend, Trump announced a second round of negotiations set to happen on Monday. However, the Iranian regime was reluctant to send its delegates after Trump announced the capture of an Iranian-flagged vessel in the Strait of Hormuz.
While Trump stated that U.S. forces will start bombing Iranian power and energy installations if Iran refuses to strike a deal, Iran responded stating it has 'new cards on the battlefield.'
With the deadline for ceasefire closing in to end and the second round of negotiations in limbo, investors were concerned of a deeper and expansive war in the Arabian neighborhood.
As a respite, yesterday Trump announced extending the truce until Iranian leaders come up with an 'unified proposal' to end the war.
This unilateral message from the U.S. brought the markets to normalcy. The call for mediations by Trump is open-ended with no specific new deadline.
However, Trump stressed that the U.S. blockade on Iranian ports will continue and noted that U.S. forces will stay near Iran, ready and able for required responses.
Iran's semi-official media outlet Tasnim reported that Iran's position will be 'officially announced later.'
Gold prices have been trading down nearly 10% since the start of the war on February 28 while oil trades roughly 60% higher.
Experts attribute a set of chain reaction after the Iran war as a cause for this decline.
Immediately after the conflict erupted, Iran shut down the Strait of Hormuz, preventing crude oil transport, sparking supply disruption, which drove the crude oil prices higher. As a result, inflation increased, prompting investors to wind back rate-cut expectations.
On the economic front, the Mortgage Bankers Association of America revealed that the Purchase Index in the U.S. increased to 175.60 on April 17 from 159.50 in the previous week.
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