Despite the recent gains, investors remain focused on upcoming US labor market data for further guidance on the Fed's policy trajectory.
Gold prices pared earlier gains on Thursday but remained near a seven-week high, as optimism over a potential agreement to open the Strait of Hormuz continued to ease inflation fears and dampen expectations for further Federal Reserve tightening.
At 7:57 AM, XAU/USD rose 0.4% to $4,262.54 an ounce, while gold futures added 0.4% to $4,321.65. XAG/USD rose 0.2% to $62.17 an ounce, and XPT/USD rose 1.3% to $1,756.50. Hormuz Optimism Supports Gold Despite Profit-Taking
Gold remained supported after Reuters reported that a proposed agreement between Iran and Oman to end the five-month standoff between Tehran and Washington would give Iran control over ships entering the Persian Gulf through the Strait of Hormuz, raising hopes for a possible easing of disruptions to global energy supplies.
Reuters reported that a proposed agreement between Iran and Oman, aimed at ending the five-month standoff between Tehran and Washington, would give Iran control over ships entering the Persian Gulf through the Strait of Hormuz. Oil prices fell on the prospect of a deal.
The prospect of lower energy prices prompted investors to reduce expectations for further Fed tightening.
Markets are now pricing in a roughly 55% chance of a rate hike in September, down from about 67% earlier this week. Meanwhile, lower Treasury yields and a subdued USD Index continued to support the precious metal, making the non-yielding metal more attractive.
The next key catalyst remains the employment report.
Despite the recent rally, investors remain focused on upcoming US labor market data for further guidance on the Fed's policy trajectory.
The ADP National Employment Report showed a slowdown in private sector hiring in July, while attention now turns to tomorrow's closely watched non-farm payrolls report.
ANZ analysts said gold's rally gained momentum as hopes for the opening of the Strait of Hormuz reduced inflationary pressures and made additional Fed rate hikes less likely. They added that prices accelerated after gold broke through a key technical resistance level, although Fed Governor Lisa Cook warned that policymakers remain prepared to raise interest rates if inflation does not slow as they cannot afford to wait for inflation to reach the Fed's 2% target.