Gold prices gave back part of their early gains on Thursday but continued to trade close to a seven-week high, supported by improving sentiment over a possible reopening of the Strait of Hormuz and reduced expectations of further Federal Reserve interest rate increases.
At 00:57 ET (04:57 GMT), spot gold (XAU/USD) gained 0.4% to $4,262.54 per ounce, while Gold Futures also rose 0.4% to $4,321.65. Silver (XAG/USD) added 0.2% to $62.17 per ounce, and platinum (XPT/USD) advanced 1.3% to $1,756.50.
Strait of Hormuz progress eases inflation worries
The precious metal remained well supported after Reuters reported that Iran and Oman are discussing an agreement aimed at ending the five-month conflict between Tehran and Washington. Under the proposal, Iran would oversee vessels entering the Gulf through the Strait of Hormuz.
The prospect of restoring more normal shipping conditions through the strategic waterway has improved confidence that global energy supply disruptions could ease, prompting oil prices to retreat.
With lower energy prices expected to reduce inflationary pressures, investors have also scaled back expectations for further monetary tightening by the Federal Reserve.
Markets are currently assigning around a 55% probability to a September interest rate increase, compared with roughly 67% earlier this week.
At the same time, declining U.S. Treasury yields and a softer dollar continued to provide additional support for bullion by increasing the attractiveness of assets that do not generate interest income.
Investors await key US employment report
Attention has now shifted to the next major economic release from the United States, which could influence expectations for future Federal Reserve policy.
The latest ADP employment survey indicated that private-sector hiring slowed during July, leaving investors focused on Friday’s official nonfarm payrolls report for a clearer assessment of labour market conditions.
Analysts at ANZ said the latest rally in gold accelerated as optimism surrounding the Strait of Hormuz reduced inflation concerns and lowered the perceived likelihood of further Federal Reserve tightening.
They also noted that bullion gained additional momentum after breaking above an important technical resistance level. However, Federal Reserve Governor Lisa Cook reiterated that policymakers remain ready to increase interest rates if inflation does not continue to slow, warning that they cannot afford to wait until inflation reaches the Fed’s 2% objective.
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