Gold prices climbed on Wednesday as declining oil prices helped temper worries about persistent inflation, following reports that Washington is working on a proposal to end the Middle East conflict.

Spot gold prices pared earlier gains to settle around $4,548.07 an ounce by 3:46 a.m. ET, representing a rise of 1.6%. Gold futures for April delivery were last seen over 3% higher at $4,545.50 per ounce.

U.S. President Donald Trump said Tuesday the U.S. and Iran are “in negotiations right now” and suggested Tehran is eager to make a peace deal, even as the Islamic Republic has denied it is in direct talks with Washington.

Speaking in the Oval Office, Trump said he decided to back off from his recent threat to order strikes on Iranian energy infrastructure “based on the fact we’re negotiating.”

“They’re talking to us, and they’re talking sense,” Trump said when asked to further explain his pivot.

However, the top spokesperson for Iran’s military denied talks were taking place, Reuters reported.

“As we have always said... no one like us will make a deal with you. Not now. Not ever,” Ebrahim Zolfaqari said on state-run television, according to the news agency.

Overnight, Tehran confirmed it would permit passage through the Strait of Hormuz for “non-hostile” vessels.

“Non‑hostile vessels belonging to or associated with other countries, provided they do not participate or cooperate in the aggressive operations against Iran and comply with the declared safety and security rules and measures, may benefit from safe passage through the Strait of Hormuz in coordination with the competent Iranian authorities,” the government said in a statement on X.

The blockade of the waterway, a critical route for oil shipping, has led to surging energy prices for almost four weeks since the war began.

Oil prices fell on Wednesday morning. International benchmark Brent crude futures fell around 5% to $99.13 per barrel, while U.S. West Texas Intermediate futures were down roughly 4% at $88.42 per barrel.

The dollar index, which measures the strength of the greenback against a basket of currencies, was down 0.17% early Asia hours.

Gold prices, however, remain about 17% below their late-January peak.

Goldman Sachs said the recent pullback in gold prices was largely in line with historical patterns, citing higher interest rate expectations and market volatility as key drivers behind the decline. 

“We don’t think that the decline … is surprising in light of our existing pricing framework,” said the bank’s co-head of global commodities research Daan Struyven on Wednesday. He noted that rising rate expectations have weighed on investor demand, particularly through gold-backed ETFs, which are “very rate sensitive.” 

Episodes of extreme market stress can also pressure bullion, Struyven told the media in a briefing call, as investors facing margin calls tend to sell gold alongside other assets.

He also suggested that gold’s latest rally has overshot fundamentals, with part of the correction reflecting “a bit of normalization.” 

Still, Goldman has maintained a structurally bullish outlook, forecasting gold to reach $5,400 by year-end, underpinned by continued central bank buying as countries seek to diversify into assets with “lower geopolitical and financial risks.”