Gold touches seven-week peak on Strait of Hormuz reopening hopes
- Spot gold was up 1% at $4,285.84 per ounce
Gold advanced to a seven-week high, driven by hopes of a Middle East diplomatic breakthrough, which led to weaker oil prices, a softer dollar, and reduced interest rate hike expectations.
- Middle East diplomatic breakthroughs and their market impact.
- The influence of oil prices and interest rates on gold's value.
- Anticipated US nonfarm payrolls report and market reactions.
Gold advanced for a fourth straight session on Thursday and touched its highest level in seven weeks, helped by weaker oil prices, a softer dollar and lower Treasury yields, on growing hopes over the Strait of Hormuz reopening.
Spot gold was up 1% at $4,285.84 per ounce by 0132 GMT, the highest level since June 18. On Wednesday, bullion posted its biggest daily gain since February.
US gold futures rose 0.9% to $4,345.80.
“The sharp rally came on building optimism that a diplomatic breakthrough in the Middle East is close to being finalised. This in turn would keep downside pressure on oil prices and reduce the need for central banks to raise rates, providing a clear tailwind for gold,” IG market analyst Tony Sycamore said.
A sustained break above the 200-day moving average could pave the way for a stronger recovery toward the $5,000 mark, he added.
A proposed deal between Iran and Oman to help end five months of war between Iran and the United States would give Tehran control over ships entering the Gulf through the Strait of Hormuz, a senior Iranian source and two regional officials told Reuters.
Oil prices slipped on Thursday.
Spot gold has declined 19% since the onset of the US-Iran conflict on February 28, due to fears of energy-driven inflation prompting higher interest rates.
Gold tends to perform better in a low interest-rate environment as it yields no interest.
Growing optimism has seen market expectations for a September US rate hike ease to 55% from 67% two days earlier.
The yield on benchmark U.S. 10-year notes fell and the US dollar index was also under pressure. A weaker U.S. currency makes dollar-priced commodities cheaper for other currency holders.
Investors are also awaiting the July US nonfarm payrolls report scheduled for release on Friday. The ADP national employment report showed that US private payrolls growth slowed in July.
A soft payrolls reading would add further support to gold, while a strong rebound could create short-term pressure as markets reassess the policy timeline, said Joshua Rotbart, founder of J. Rotbart & Co.
Among other metals, spot silver gained 0.1% to $62.16, platinum was up 1.7% to $1,764.10 after hitting its highest level since June.
Palladium climbed 1.1% to $1,377.83, up for a third consecutive session.