NEW YORK: Gold prices climbed on Monday as a pause in strikes between the United States and Iranian forces dragged crude oil prices lower, helping ease inflation concerns and worries about the risk of higher interest rates in a week when Fed policymakers are due to meet.
Spot gold gained 1percent to USD4,092.87 per ounce by 1200 GMT, while US gold futures for August delivery rose 0.7percent to USD4,098.00. “Precious metals have started the week on the front foot, helped by a pause in Middle East hostilities.
Oil has slumped and both the dollar and US Treasury yields have eased,” said independent analyst Ross Norman. The US dollar index dropped 0.2percent, making greenback-priced bullion more affordable for buyers overseas.
On Sunday, Iran said it would halt its own attacks as long as the United States does the same, a senior Iranian official told Reuters. Washington paused its bombing campaign after President Donald Trump’s advisers told him they were running out of targets and expressed worries about depleting the US arsenal.
Oil prices tumbled more than 5percent on Monday, raising hopes of a diplomatic solution to de-escalate the conflict surrounding the Strait of Hormuz.
Elevated energy prices bolster inflation concerns and raise expectations of higher-for-longer interest rates. While gold is seen as a hedge against inflation, the yellow metal suffers in a high interest rate environment due to its non-yielding characteristic. Investors are now eyeing the Fed’s interest rate decision meeting on Wednesday, with about 34percent of market participants anticipating a rate hike.
“Gold is flashing cautiously positive signals: one eye on Iran, the other on the Fed. If Warsh pushes back against the roughly two hikes now embedded in the curve, that could be quite supportive for gold,” Norman said.
Traders are pricing in about a 79percent chance of an interest rate hike in September, according to the CME FedWatch Tool. Elsewhere, spot silver rose 1.5percent to USD59.05 per ounce, platinum gained 2.7percent to USD1,631.22, and palladium climbed 2.7percent to USD1,277.47.
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