Gold prices surged 4.4% on Wednesday to $4,253.36 an ounce, marking their largest single-day gain since February. The rally was driven by a drop in U.S. Treasury bond yields and rising expectations of progress in negotiations to reopen the Strait of Hormuz. During intraday trading, spot gold reached $4,264.93 an ounce, its highest price since June 18.
The metal also broke above its 50-day moving average, which now serves as technical support at $4,160. Meanwhile, gold futures climbed 3.7% to settle at $4,305.20 an ounce.
Tai Wong, an independent precious metals trader, said investors are returning to precious metals as the probability of further interest rate hikes has declined compared to last week. Wong added that a substantial drop in the U.S. dollar and de-escalation of tensions with Iran are supporting the market.
Drivers of market sentiment
The U.S. dollar traded near its lowest level in six weeks against major currencies, while the 10-year U.S. Treasury yield remained close to its weekly lows. Sentiment across financial markets improved after U.S. President Donald Trump stated that his administration had very good discussions with Iran during negotiations, raising hopes that the five-month conflict might be coming to an end.
Despite Wednesday's strong rebound, gold remains approximately 24% below its historical record of $5,594.82 per ounce reached in January. It also trails by 19% the price levels seen at the start of the conflict with Iran, when energy inflation fears and expectations of rate increases pushed gold prices higher.
According to J.P. Morgan, gold prices are now primarily shaped by ETF inflows and outflows driven by interest rate expectations. The firm noted that central bank buying has slowed, physical demand in Asia remains weak, and retail investors have shifted attention toward alternative asset classes. Wong commented that for precious metals to build true momentum, markets must price in rate cuts, though he noted that such cuts appear delayed until 2027 at the earliest.
Other precious metals and broader outlook
Other precious metals also recorded gains on Wednesday as positive developments in Iran negotiations lifted overall investor sentiment. Spot silver climbed 4.4% to $62.11 an ounce, reaching its highest level since July 6. Platinum rose 0.2% to $1,740.04 an ounce, its highest since June 17, while palladium gained 1.5% to $1,373.24 an ounce, its highest since June 2.
Broader market conditions remain risk-on for the rest of the summer, with developed market equities, particularly in Europe, standing as the preferred asset class. In related market assessments, the head of Metlen identified Western reliance on China for strategic metals as one of the major challenges of the new industrial era. Moody's also highlighted a major macroeconomic regime shift away from the post-2008 global financial crisis era.
