Gold prices gained on Tuesday, supported by a decline in oil prices that tempered inflation fears and lowered U.S. interest rate hike bets, while markets awaited further clues on the Federal Reserve’s policy path.
Spot gold rose 0.6% to $4,078.10 per ounce, while U.S gold futures gained 1.1% to $4,134.60.
Oil prices pared gains after Qatar said efforts to secure a diplomatic resolution to the U.S-Iran conflict were continuing, though disruptions to oil flows through key shipping routes persisted. Brent crude futures were down over 4% on the news.
Lower oil is probably one of the drivers supporting gold prices, said Bart Melek, global head of commodity strategy at TD Securities, adding that the decline in many ways has contributed to the interest rate outlook with short-term rates falling a little bit.
Elevated energy prices reinforce expectations that the Fed will keep interest rates higher-for-longer to combat inflation, weighing on non-yielding bullion.
Earlier on Monday, Fed’s New York President John Williams said he remained optimistic that inflation pressures were on track to ease gradually, but if they do not, the U.S central bank will not hesitate to respond with rate hikes.
Traders are now pricing in about a 61% chance of a rate hike in the central bank’s September meeting after a divided Fed kept rates unchanged at its last policy meeting.
Market participants are now awaiting a series of U.S jobs reports this week, including the ADP employment report due on Wednesday and the nonfarm payrolls data on Friday.
“Anything that shows economic weakness is probably accretive to gold, mainly because it reduces the likelihood or the need for the central bank to act on interest rates,” Melek said.
Leave a Reply
You must be logged in to post a comment.