Gold touches seven-week high on Strait of Hormuz reopening hopes

Gold reached a seven-week high on Thursday, buoyed by weaker oil prices, a weaker dollar, and lower Treasury yields, as traders grew optimistic over the potential reopening of the Strait of Hormuz. Spot gold surged 1% to $4,285.84 per ounce, the highest level since June 18. Analysts noted that a diplomatic breakthrough in the Middle East could keep oil prices down and ease the need for central banks to raise interest rates, providing a favorable environment for gold.

Should gold break above the 200-day moving average, it could propel a stronger recovery toward the $5,000 mark. A proposed agreement between Iran and Oman aimed at ending a five-month conflict with the United States would grant Tehran control over ships entering the Gulf via the Strait of Hormuz. Oil prices dropped on Thursday, and gold's decline since the U.S.-Iran conflict began in February has been 19%.

The prospect of a September U.S. rate hike has become less likely, with market expectations dropping from 67% to 55%. As gold typically performs well in a low-interest-rate environment, growing optimism has reduced the likelihood of a U.S. rate hike to 55%, down from 67% two days earlier. A weaker U.S. dollar makes dollar-priced commodities, including gold, more affordable for holders of other currencies.

Investors are also eagerly awaiting the July U.S. nonfarm payrolls report, which is scheduled for release on Friday. A softer-than-expected report would bolster gold's prospects, while a stronger-than-expected reading could create short-term pressure on the market as investors reassess the policy timeline. Meanwhile, silver rose 0.1% to $62.16, platinum increased by 1.7% to $1,764.10, and palladium climbed by 1.1% to $1,377.83, marking its third consecutive day of gains.