Gold hovers near seven-week high on easing rate hike concerns

NEW YORK: Gold climbed to a seven-week high on Thursday, extending gains into a fourth session, as hopes surrounding the re-opening of the Strait of Hormuz eased mounting fears around inflation and higher-for-longer interest rates.

Spot gold was up 0.4percent at USD4,261.86 per ounce by 1125 GMT, after earlier hitting its highest level since June 18. On Wednesday, bullion posted its biggest daily gain since February, climbing as much as USD4,267.24 per ounce. US gold futures rose 0.4percent to USD4,321.40.

“Gold tries to hold onto its recent gains today amid growing optimism around the Strait of Hormuz. Hopes for a diplomatic breakthrough that restores oil flows are easing inflationary fears and paring back aggressive Fed tightening bets,” said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com.

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.

Market expectations for a September US rate hike have eased to 55percent from 67percent two days earlier. While gold is typically seen as a hedge against inflation, it loses its appeal as a non-yielding asset in high-interest-rate environments.

Federal Reserve Bank of San Francisco President Mary Daly said she was “completely supportive” of the decision last week to hold interest rates steady as the central bank gathers more data about how it should respond to inflation that is well above its 2percent target. Investors are awaiting the July US non-farm payrolls report scheduled for release on Friday.

The ADP national employment report showed that US private payrolls growth slowed in July. “Gold remains vulnerable to renewed pressure and fresh 2026 lows. With lingering price pressures keeping rate-hike dissenters active and geopolitical risks finely balanced, any diplomatic setback could quickly resurrect those downside dynamics,” Tzabouras added.

Among other metals, spot silver fell 0.6percent to USD61.69. Platinum was up 1percent to USD1,752.73, and palladium climbed 1.4percent to USD1,382.87, with both metals up for a third consecutive session.