Gold prices moved higher at the start of the week as oil prices fell sharply after U.S. President Donald Trump postponed a new strike on Iran in hopes of reaching a swift agreement. The development eased some concerns about inflation and the prospect of interest rates remaining higher for longer.

As of 00:23 GMT, spot gold rose 0.7% to $4,067.06 per ounce, while U.S. gold futures gained 0.9% to $4,065.60.

Oil Prices Fall as Tensions Temporarily Ease

Trump said that Iran and several Middle Eastern countries had requested more time to finalize an agreement aimed at the immediate, full and comprehensive reopening of the Strait of Hormuz and addressing what he described as Iran’s nuclear threat.

The announcement sent oil prices down by more than $5 per barrel at the opening of Monday’s session.

Lower oil prices helped ease concerns that the conflict could fuel another rise in inflation. This supported gold, which tends to come under pressure when markets expect central banks to keep interest rates elevated.

Fed Officials Remain Concerned About Inflation

Three Federal Reserve officials who opposed a rate increase at last week’s policy meeting said on Friday that inflation could remain stuck above the Fed’s 2% target unless short-term borrowing costs are raised soon.

Although gold is traditionally viewed as a hedge against inflation, its appeal often weakens in a high-interest-rate environment because the metal does not generate income.

Markets Await U.S. Labor Data

Investors will also focus on a series of U.S. labor-market reports scheduled for release this week, including:

• Job openings data

• The ADP employment report

• Weekly jobless claims

• The nonfarm payrolls report

These releases could directly influence expectations for interest rates, the U.S. dollar and the next move in gold prices.

Other Precious Metals Also Gain

Spot silver rose 0.7% to $58.02 per ounce, platinum gained 0.7% to $1,653.78, while palladium climbed 1.5% to $1,293.00.

Conclusion

Gold is being supported by the sharp decline in oil prices and expectations that U.S.-Iran tensions may temporarily ease. However, the next move will still depend on the progress of negotiations, upcoming U.S. labor data and signals from the Federal Reserve.

Source: Reuters