Gold gains more than 1% as softer oil prices ease inflation worries
Gold rose more than 1% on Monday as softer oil prices eased inflation concerns, while investors awaited key US inflation data and fresh signals from the Federal Reserve on its policy outlook.
Gold experienced a rise of over 1% on Monday, with softer oil prices alleviating inflation concerns. Investors were also eagerly anticipating key US inflation data and insights from the Federal Reserve regarding its policy stance. Spot gold increased by 1.6% to $4,129.69 per ounce by 0220 GMT, while US gold futures for December delivery climbed by 1.6% to $4,139.00.
Bullion had gained approximately 5% over the previous week. Oil prices experienced a decline after Donald Trump expressed a high likelihood of avoiding further attacks on Iran, as talks aimed at resolving the conflict persisted. This easing of concerns about potential supply disruptions contributed to lower oil prices, which can help curb inflationary pressures and reduce the likelihood of sustained higher interest rates.
Consequently, the opportunity cost of holding non-yielding bullion decreased. Tim Waterer, the chief market analyst at KCM Trade, noted that Trump's more diplomatic approach toward Iran is contributing to a stabilization of oil prices, thus easing inflationary pressure on the metal and making greenback-priced bullion more accessible to international buyers.
The US dollar weakened, making gold priced in US dollars more affordable for overseas purchasers. In the meantime, US job growth intensified in October, and the unemployment rate declined to 4.1%, reinforcing the perception of a resilient labor market and signaling that the Federal Reserve is likely to raise interest rates in December.
Traders now predict a 79% probability that the Federal Reserve will increase rates in December, up from 71% before the employment figures were released, according to CME's FedWatch tool. Market participants will be closely monitoring the US Consumer Price Index data, set to be released on Tuesday, and the Producer Price Index, released on Friday, to gain further insight into the Fed's monetary policy trajectory.
"Any unexpected data could likely strengthen the dollar and raise the odds of a December rate hike, which would swiftly put gold back in a defensive position," Waterer added. Silver, platinum, and palladium also saw gains, with spot silver rising by 2.8% to $53.31 per ounce, platinum increasing by 1.6% to $1,556.14, and palladium gaining 2.1% to $1,044.28.
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