Gold prices held close to their strongest levels in seven weeks on Monday as investors balanced continuing geopolitical uncertainty surrounding Iran against shifting expectations for U.S. monetary policy ahead of important inflation releases.
Spot gold advanced 0.3% to $4,354.51 an ounce by 03:03 ET (07:03 GMT), while U.S. gold futures gained the same amount to $4,414.40.
Bullion had climbed to its highest level since June 17 during Friday’s session after a surprisingly weak U.S. employment report showed that the economy lost jobs in July. Previous months were also subject to substantial downward revisions, challenging earlier assumptions about the resilience of the American labour market.
Rate hike expectations retreat after U.S. employment shock
The weaker jobs picture caused traders to reassess the likelihood of another Federal Reserve interest-rate increase in September.
Futures markets now indicate less than a 50% probability of a rate hike at the September 15-16 meeting. Before the employment figures were released, markets had assigned a greater-than-even chance to another increase.
This shift has provided support for bullion. Gold pays no interest, meaning a lower interest-rate environment typically reduces the relative disadvantage of holding the precious metal compared with yield-generating assets.
The next major signals are expected from Wednesday’s U.S. Consumer Price Index report and Thursday’s producer inflation figures. Evidence that price pressures are moderating could strengthen expectations for a less restrictive Federal Reserve policy stance.
Strait of Hormuz keeps geopolitical risk elevated
Developments involving Iran are providing another source of support for precious metals. Tehran has said negotiations with Oman over new shipping routes through the Strait of Hormuz are nearing a final agreement, but several conditions involving Washington remain unresolved.
Iran maintains that these requirements must be satisfied before the strategically important shipping route can fully reopen, leaving uncertainty surrounding energy flows through the Persian Gulf.
Continued geopolitical instability generally strengthens gold’s appeal as a safe-haven asset. However, higher crude prices introduce a competing influence by potentially adding to inflationary pressures. Persistent energy-driven inflation could make it more difficult for the Federal Reserve to move towards a more accommodative policy stance.
Precious and industrial metals move higher
Silver outperformed gold during Monday’s session, rising 1.3% to $64.36 an ounce, while platinum added 0.5% to reach $1,757.64.
Copper also strengthened, with benchmark London Metal Exchange futures gaining 0.6% to $14,126.33 per tonne. U.S. copper futures increased 0.7% to $6.635 per pound.
“Copper has rallied sharply on expectations of US import tariffs, as traders rush metal into the US and physical markets tighten. With prices back near record highs, any policy disappointment could put that tariff premium to the test,” ING analysts said in a recent note.
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