Gold extends gains on lower oil and softer dollar, markets await US jobs data

Gold extended its gains on Wednesday, buoyed by a weaker dollar and falling oil prices, while market participants awaited U.S. employment data that could provide insight into future interest rates. Spot gold climbed 1.3% to $4,127.04 an ounce by 2:53 a.m. GMT, while U.S. gold futures edged up 0.8% to $4,184.40. The U.S. dollar's softness made metals priced in the currency more appealing to non-dollar holders.

Oil prices stabilized after sharp declines the previous two sessions, potentially easing inflation concerns that often spur expectations of higher interest rates. Qatar reported that mediators were making progress in negotiations aimed at ending the U.S.-Iran conflict, though Iran has contradicted claims by U.S. President Donald Trump that talks are already in progress.

Analyst Kelvin Wong of OANDA noted that gold's correlation with oil remains relevant, as oil prices significantly influence the global economy through inflationary pressures. If a clear path to de-escalation in tensions emerges, gold prices could rise further. Market expectations now stand at a 59% chance of a Federal Reserve interest rate increase at the September 15-16 meeting, a reduction from 67% a day earlier.

Gold typically loses its allure in a high-interest-rate environment, despite its role as an inflation hedge, due to its lack of yield. Federal Reserve Bank of Philadelphia President Anna Paulson indicated an open mind when discussing potential future monetary policy moves in an outlook that may recommend higher rates. Traders prepared for the upcoming ADP employment report later in the day and the July payrolls report scheduled for Friday.

Analysts at TD Securities forecast gold to trade in a narrow range near the present levels. Silver rose 1.9% to $60.64 an ounce, while platinum increased 1.4% to $1,758.35, marking its highest level since mid-June. Palladium posted a 0.9% gain to $1,365.62, up for a second consecutive session.