Gold prices eased from earlier highs on Thursday but continued to trade close to their strongest level in seven weeks, as growing optimism over a possible agreement to reopen the Strait of Hormuz helped ease inflation expectations and reduced concerns that the Federal Reserve may need to tighten monetary policy further.
At 00:57 ET (04:57 GMT), spot gold (XAU/USD) was up 0.4% at $4,262.54 an ounce, while Gold Futures gained 0.4% to $4,321.65. Silver (XAG/USD) advanced 0.2% to $62.17 an ounce, and platinum (XPT/USD) climbed 1.3% to $1,756.50.
Strait of Hormuz developments keep gold supported
Gold continued to find support after Reuters reported that a proposed agreement between Iran and Oman aimed at ending the five-month conflict between Tehran and Washington would grant Iran oversight of vessels entering the Gulf through the Strait of Hormuz.
The prospect of a diplomatic breakthrough has fuelled expectations that disruptions to global energy supplies could begin to ease. Oil prices moved lower following the report as traders anticipated reduced supply risks.
Lower energy prices have, in turn, encouraged investors to trim expectations for additional Federal Reserve interest rate increases.
Markets are now pricing in roughly a 55% probability of a rate hike in September, compared with around 67% earlier this week.
At the same time, softer U.S. Treasury yields and a weaker U.S. Dollar Index continued to support gold by improving the appeal of non-yielding assets.
US jobs data remains the next key driver
Despite the recent advance, investors remain focused on upcoming U.S. employment figures, which are expected to provide further guidance on the Federal Reserve’s next policy move.
The latest ADP National Employment Report showed that private-sector job creation slowed during July, shifting attention to Friday’s closely watched nonfarm payrolls report.
Analysts at ANZ said gold’s rally gained momentum as hopes of reopening the Strait of Hormuz reduced inflation concerns and made further Federal Reserve rate increases appear less likely.
They also noted that prices accelerated after gold broke through an important technical resistance level. However, Federal Reserve Governor Lisa Cook warned that policymakers remain prepared to raise interest rates if inflation does not continue to moderate, stressing that they cannot afford to wait until inflation reaches the central bank’s 2% target.