Gold prices climbed to a near three-week high on Wednesday as markets reassessed near-term risks after US President Donald Trump agreed to suspend bombing and attacks on Iran for two weeks, easing fears of energy-driven inflation.
Spot gold was up 2.5% at $4,819.25 per ounce, as of 0534 GMT. Earlier in the session, bullion rose more than 3% to its highest level since March 19.
US gold futures for June delivery gained 3.5% to $4,847.70.
Trump said Washington had agreed to a two-week pause in attacks and received a 10-point proposal from Iran what he described as a workable basis for negotiations.
His comments followed earlier warnings that Tehran must reopen the Strait of Hormuz or risk US retaliation on its civilian infrastructure.
"People went into this session thinking that escalation was very likely, but the announcement of a two-week truce kind of upended that expectation and that was gold positive," said Nicholas Frappell, global head of institutional markets at ABC Refinery.
Iran's Supreme Security Council said negotiations with the United States would begin on April 10 in Islamabad, after it submitted its proposal via Pakistan, although it added that the talks did not signal an end to the war.
Rising energy prices could fuel inflation and complicate central banks' decision on interest rates. While gold is often seen as an hedge against inflation and uncertainty, its appeal tends to weaken in a high-interest-rate environment as it offers no yield.
Markets are now awaiting minutes, due later in the day, from the Fed's meeting held in March.
Gold, which started the year on a strong note, has fallen more than 8% since the Iran war erupted on February 28.
"This is a knee-jerk relief rally and it remains to be seen if Iran complies. For gold, the 200 day-moving-average at $4,930 and then $5,000 will be key hurdles. Similarly, $80-$81 is a important level for silver," independent metals trader Tai Wong said.
Spot silver jumped 5.5% to $76.91 per ounce, platinum gained 3.9% to $2,034.65 and palladium added 4.9% at $1,541.71.
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