Gold traded higher on Monday, benefiting from a weaker U.S. dollar after oil prices retreated sharply on renewed hopes of a diplomatic solution in the Middle East. Despite the positive move in precious metals, investors remained cautious ahead of a series of major U.S. economic releases expected to influence expectations for Federal Reserve interest rates.
As of 01:43 ET (05:43 GMT), spot gold (XAU/USD) was up 0.5% at $4,062.41 per ounce, while gold futures gained 0.3% to $4,117.35. Silver (XAG/USD) advanced 0.6% to $57.98 per ounce and platinum (XPT/USD) rose 0.3% to $1,650.18.
Falling Oil Prices Boost Safe-Haven Demand
The precious metal strengthened after U.S. President Donald Trump announced that Iran and several Middle Eastern nations had requested additional time to complete an agreement aimed at reopening the Strait of Hormuz and addressing concerns over Tehran’s nuclear programme.
The announcement reduced fears of an imminent military escalation, triggering a decline of more than $5 per barrel in crude oil prices during Asian trading hours.
Lower oil prices eased immediate concerns about energy-driven inflation, reducing expectations that central banks may need to tighten monetary policy more aggressively.
At the same time, the U.S. Dollar Index slipped further below the 100 level to around 99.7. Because gold is priced in dollars, a weaker U.S. currency makes the metal more affordable for overseas investors, helping to increase demand.
Federal Reserve Policy Remains a Key Market Driver
Although bullion started the week on a positive note, traders continued to assess the outlook for U.S. monetary policy following comments from three Federal Reserve officials who dissented at last week’s policy meeting.
The policymakers argued on Friday that inflation remains above the central bank’s target and that another interest rate increase is needed to maintain the Federal Reserve’s credibility in fighting price pressures.
Higher interest rates generally reduce the attractiveness of gold because the metal does not generate income, making interest-bearing assets relatively more appealing.
Technical Picture Suggests More Confirmation Is Needed
Tony Sycamore, senior market analyst at IG, said he continues to expect higher gold prices over the longer term, although recent trading has not matched those expectations.
“Our bias has been for gold prices to move higher in recent weeks, but the price action has been disappointing to say the least,” Sycamore said.
According to Sycamore, gold must break above resistance between $4,110 and $4,120 before targeting the early July high of $4,202. Such a move would indicate that prices have established a durable base above the late-June low of $3,942 and could signal the beginning of a broader upward trend.
Until that happens, he believes the possibility of another decline toward the $3,942 support level cannot be ruled out.
Economic Calendar Could Shape the Next Move
Investors will now focus on several important U.S. economic reports scheduled for this week, which may provide further guidance on the Federal Reserve’s next policy decision.
Among the key releases are the JOLTS job openings survey, the ADP private employment report, weekly initial jobless claims and Friday’s nonfarm payrolls report, all of which will be closely watched for indications about labour market strength and inflationary pressures.
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