Bullion gains as oil prices tumble more than 5% following renewed US-Iran talks, while investors await key US employment data
London: Gold prices edged higher on Monday after US President Donald Trump held off on fresh military action against Iran and signalled new talks with Tehran, helping to push oil prices sharply lower and easing concerns about inflation and higher interest rates.
Spot gold rose 0.4% to $4,055.76 per ounce, while US gold futures gained 0.9% to $4,054.00.
Japanese yen
The US dollar also came under pressure after authorities intervened in foreign exchange markets to support the Japanese yen, making dollar-priced gold more affordable for international buyers.
Tim Waterer, Chief Market Analyst at KCM Trade, said gold had started the week on a positive note, although gains remained limited amid continued uncertainty surrounding the Middle East and energy markets.
“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’s an upbeat but guarded start for the metal,” he said.
Trump said talks with Iran would take place on Monday but did not set a deadline for reaching an agreement. The prospect of renewed diplomacy helped send oil prices down by more than 5%.
Gold has faced pressure since the outbreak of the US-Iran conflict, as rising energy prices have fuelled concerns that higher inflation could prompt central banks to raise interest rates. While gold is traditionally viewed as a hedge against inflation, higher interest rates generally reduce the appeal of non-yielding assets such as bullion.
Market sentiment has also been influenced by the Federal Reserve’s stance on inflation.
Three Fed officials who dissented at last week’s policy meeting in favour of a rate increase warned on Friday that inflation could remain above the central bank’s 2% target without tighter monetary policy.
US labour market reports
Investors are now turning their attention to a series of US labour market reports due this week, including job openings data, the ADP employment report, weekly jobless claims and the closely watched nonfarm payrolls report.
Waterer said gold’s next move could largely depend on developments in energy markets, the dollar and expectations for US interest rates.
“A sustained break higher would likely require a clearer drop in oil prices, a softer dollar, or a shift in Fed rate expectations toward a more dovish stance,” he said.
He added that renewed escalation in the Middle East or stronger-than-expected US jobs data could limit further gains in gold by reinforcing expectations of additional Fed rate hikes.
Among other precious metals, silver rose 0.9% to $58.13 per ounce, platinum gained 0.5% to $1,649.35, and palladium climbed 1.7% to $1,294.92.
Source: Emirates 24|7