Gold hits highest level since Jun 18 on Strait of Hormuz reopening hopes

GOLD advanced for a fourth straight session on Thursday (Aug 6) and touched its highest level in seven weeks, helped by weaker oil prices, a softer US dollar and lower US Treasury yields, on growing hopes over the Strait of Hormuz reopening.

Spot gold was up 1 per cent at US$4,285.84 per ounce by 0132 GMT, the highest level since Jun 18. On Wednesday, bullion posted its biggest daily gain since February.

US gold futures rose 0.9 per cent to US$4,345.80.

“The sharp rally came on building optimism that a diplomatic breakthrough in the Middle East is close to being finalised. This in turn would keep downside pressure on oil prices and reduce the need for central banks to raise rates, providing a clear tailwind for gold,” IG market analyst Tony Sycamore said.

A sustained break above the 200-day moving average could pave the way for a stronger recovery toward the US$5,000 mark, he added.

A proposed deal between Iran and Oman to help end five months of war between Iran and the US would give Teheran control over ships entering the Gulf through the Strait of Hormuz, a senior Iranian source and two regional officials told Reuters.

Oil prices slipped on Thursday. Spot gold has declined 19 per cent since the onset of the US-Iran conflict on Feb 28, due to fears of energy-driven inflation prompting higher interest rates. Gold tends to perform better in a low interest-rate environment as it yields no interest.

Growing optimism has seen market expectations for a September US rate hike ease to 55 per cent from 67 per cent two days earlier.

The yield on benchmark US 10-year notes fell and the US dollar index was also under pressure. A weaker US currency makes US dollar-priced commodities cheaper for other currency holders.

SEE ALSO

Iran says agreement on Hormuz shipping reached with Oman

Iran threatens to hit Gulf states if US launches new strikes

Oil prices mixed as investors ponder Strait of Hormuz reopening hopes

Investors are also awaiting the July US non-farm payrolls report scheduled for release on Friday. The ADP national employment report showed that US private payrolls growth slowed in July.

A soft payrolls reading would add further support to gold, while a strong rebound could create short-term pressure as markets reassess the policy timeline, said Joshua Rotbart, founder of J Rotbart & Co.

Among other metals, spot silver gained 0.1 per cent to US$62.16, platinum was up 1.7 per cent to US$1,764.10 after hitting its highest level since June.

Palladium climbed 1.1 per cent to US$1,377.83, up for a third consecutive session. REUTERS