Gold continued its advance on Thursday, marking a fourth straight session of gains and climbing to levels not seen in seven weeks as market participants reacted to reports suggesting progress toward a diplomatic arrangement for the Strait of Hormuz. The development pressured oil prices, the U.S. dollar and benchmark Treasury yields, supporting demand for dollar-priced bullion.
At 22:20 ET (02:20 GMT), spot gold (XAU/USD) was up 1.1% at $4,293.94 an ounce after earlier reaching an intraday high of $4,304.15. Gold futures rose 1.1% to $4,353.12. Silver (XAG/USD) gained 0.5% to $62.39, while platinum (XPT/USD) climbed 2.3% to $1,774.68.
Reports indicated a proposed understanding between Iran and Oman that could affect control of vessels transiting the Strait of Hormuz, a narrow chokepoint for global energy shipments. The prospect of reduced disruption to energy flows contributed to lower oil prices and eased a key source of upside inflation pressure.
That easing of energy-related price risk has led investors to re-evaluate prospects for further Federal Reserve tightening. Markets now assign roughly a 55% probability to a September rate increase, down from about 67% two days earlier.
At the same time, benchmark Treasury yields softened and the U.S. Dollar Index came under pressure, making bullion relatively more attractive to buyers outside the United States. Analysts at ANZ said the gold rally gained momentum as hopes for reopening the Strait of Hormuz reduced inflationary prospects and made additional Fed hikes appear less likely. They also noted that prices accelerated after bullion moved above a key technical resistance level.
Investors are, however, keeping one of the major upcoming U.S. economic releases firmly in focus. The ADP National Employment Report showed private-sector hiring slowed in July, and attention is now turning to Friday's closely watched nonfarm payrolls release for broader insight into the labor market and the Fed's policy path.
Federal Reserve Governor Lisa Cook has cautioned that policymakers remain prepared to raise interest rates if inflation does not decelerate sufficiently, saying they cannot afford to wait until inflation returns to the Fed's 2% target before taking action. That warning serves as a reminder that while markets have dialed back some rate-hike odds, the central bank's policy stance remains data-dependent.
Key points
- Gold rose to a seven-week high as it extended a four-session rally, with spot XAU/USD at $4,293.94 after hitting $4,304.15 intraday.
- Reports of a proposed Iran-Oman agreement affecting control of vessels in the Strait of Hormuz eased oil prices and inflation concerns, prompting markets to lower chances of a September Fed rate hike to about 55% from 67% two days earlier.
- Financial indicators that supported the rally included softer benchmark Treasury yields and a weaker U.S. Dollar Index, increasing the appeal of dollar-priced bullion for overseas buyers.
Risks and uncertainties
- Upcoming U.S. labor market data - particularly Friday's nonfarm payrolls - could reshape Fed rate expectations and quickly reverse market positioning if the report surprises to the upside or downside; this would affect interest-rate sensitive assets including gold and Treasuries.
- Policy risk - despite softer market-implied odds for a near-term hike, Federal Reserve officials have signaled readiness to tighten further if inflation does not slow, leaving monetary policy plans contingent on incoming data and maintaining uncertainty for markets.
- Geopolitical developments - while reports of a potential agreement regarding the Strait of Hormuz have eased some energy-risk premiums, the situation remains subject to diplomatic progress and could reintroduce volatility to oil, currencies and commodity prices if negotiations falter.
The interplay between evolving geopolitical signals, incoming U.S. economic data and central bank guidance will likely determine near-term momentum in precious metals and related markets. For now, bullion has benefited from a combination of lower oil prices, reduced Fed tightening odds and softer yields, but those drivers are liable to change as fresh information arrives.