Spot gold climbed for a fourth straight session on Thursday, August 6, touching a seven-week high as growing hopes for the reopening of the Strait of Hormuz pushed oil prices lower, softened the dollar and dragged down Treasury yields, according to a Reuters report published by The Hindu BusinessLine. Spot gold rose 1% to $4,285.84 per ounce by 0132 GMT, the highest level since June 18; Wednesday marked bullion's biggest daily gain since February, and U.S. gold futures gained 0.9% to $4,345.80.
Hormuz diplomacy lifts sentiment
The sharp rally came on building optimism that a diplomatic breakthrough in the Middle East is close to being finalised, IG market analyst Tony Sycamore told Reuters. A proposed deal between Iran and Oman would give Tehran control over ships entering the Gulf through the Strait of Hormuz and help end five months of war between Iran and the United States, a senior Iranian source and two regional officials told Reuters. Oil prices slipped on Thursday as the diplomatic momentum built.
"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," Sycamore said.
Sycamore added that a sustained break above the 200-day moving average could pave the way for a stronger recovery toward the $5,000 mark.
Key technical levels cited in the report:
- Spot gold's seven-week high of $4,285.84 per ounce
- The 200-day moving average as the next resistance threshold
- A potential push toward the $5,000 mark on a sustained break above that average
Rate expectations ease
Growing optimism over the Hormuz breakthrough eased market expectations for a September U.S. rate hike to 55% from 67% two days earlier, the report said. Gold tends to perform better in a low interest-rate environment as it yields no interest. Spot gold has declined 19% since the onset of the U.S.-Iran conflict on February 28, due to fears of energy-driven inflation prompting higher interest rates. The yield on benchmark U.S. 10-year notes fell and the U.S. dollar index was also under pressure, making dollar-priced commodities cheaper for other currency holders.
Payrolls report in focus
Investors are awaiting the July U.S. nonfarm payrolls report scheduled for release on Friday. The ADP national employment report showed that U.S. private payrolls growth slowed in July, setting up a potentially decisive data point for bullion.
"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.
Precious metals complex
Other precious metals also advanced as the dollar softened. Spot silver gained 0.1% to $62.16, platinum rose 1.7% to $1,764.10 after hitting its highest level since June, and palladium climbed 1.1% to $1,377.83, up for a third consecutive session.
| Metal | Price | Daily change |
|---|---|---|
| Spot gold | $4,285.84/oz | +1% |
| U.S. gold futures | $4,345.80 | +0.9% |
| Spot silver | $62.16 | +0.1% |
| Platinum | $1,764.10 | +1.7% |
| Palladium | $1,377.83 | +1.1% |
Across the precious metals complex, the report showed gains in silver, platinum and palladium alongside gold, with platinum marking its highest level since June and palladium extending its rally to a third consecutive session. For traders tracking the macro picture, the combination of easing rate-hike expectations and softer oil prices, both tied to the Iran-Oman diplomacy, remains the central driver of bullion's recovery from a 19% decline since the conflict began on February 28.
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