Gold firms as oil prices slump after Trump holds off on Iran attack
The metal has faced pressure since the Iran war, with rising inflation potentially sparking interest rate hikes
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[BENGALURU] Gold rose on Monday (Aug 3) as oil prices fell after US President Donald Trump held off on fresh attacks on Iran in hopes of a swift deal, slightly easing concerns over inflation and higher interest rates.
Spot gold was up 0.4 per cent at US$4,055.76 per ounce, as at 0210 GMT. US gold futures rose 0.9 per cent to US$4,054.00.
The US dollar came under pressure after authorities intervened in the foreign exchange market to support the yen, making dollar-priced bullion more affordable for overseas buyers.
Gold has made a relatively cheery start to the week but gains remain limited given the uncertainty around the oil markets and the Middle East, so it is an upbeat but guarded start for the metal, said Tim Waterer, chief market analyst at KCM Trade.
Trump said talks with Iran will happen on Monday but declined to set a deadline for an agreement. Oil prices fell more than 5 per cent.
Gold has come under pressure since the start of the US-Iran conflict, as a war-driven rise in inflation could prompt central banks to raise interest rates.
Although bullion is traditionally viewed as a hedge against inflation, its appeal tends to diminish in a high-interest rate environment because it does not yield interest.
Three US Federal Reserve officials who dissented at the policy meeting last week in favour of a rate hike expressed concerns on Friday that without an immediate increase in short-term borrowing costs, inflation will stay stuck above the Fed’s 2 per cent target.
Market participants will also focus on a slew of US jobs reports due this week, including job openings data, the ADP employment report, weekly jobless claims and the nonfarm payrolls (NFP) report.
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“A sustained break higher would likely require a clearer drop in oil prices, a softer (US) dollar, or a shift in Fed rate expectations towards a more dovish stance,” Waterer said.
On the downside, any renewed escalation in the Middle East that pushes oil higher, or a strong NFP print that reinforces September rate hike odds, could cap the upside, he added.
Spot silver gained 0.9 per cent to US$58.13, platinum climbed 0.5 per cent to US$1,649.35, and palladium firmed 1.7 per cent to US$1,294.92. REUTERS
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