Gold Nears US$4,300 in Four-Day Rally
Gold prices strengthened again during Asian trading on Thursday (Aug. 6), extending gains for a fourth consecutive session. Spot gold rose toward US$4,283 per troy ounce after surging more than 4% in the previous session. Cumulatively, gold prices have risen nearly 6% this week, edging closer to the psychological US$4,300 level. At Wednesday's close, spot gold stood at US$4,253.36, while the December futures contract settled at US$4,305.20.
The gold rally was primarily driven by an agreement between Iran and Oman regarding a temporary shipping lane in the Strait of Hormuz. The prospect of partially restored oil flows weighed on energy prices and eased inflation risks, prompting the market to scale back projections for Federal Reserve interest rate hikes to just one more increase before year-end. Lower interest rates benefit gold, as the precious metal does not yield a return.
However, the agreement does not mean the Strait of Hormuz will immediately fully reopen. The interim arrangement is expected to remain in effect for 60 days to four months, while issues regarding transit fees, vessel monitoring, the blockade of Iranian ports, and the role of the Revolutionary Guard remain unresolved. Consequently, the risk of implementation failure could still trigger volatility in oil and gold markets.
Additional support stemmed from a weakening US labor market. ADP data showed private companies added only 44,000 jobs in July, well below the forecast of 70,000. The employment component of the ISM Services index also fell into contraction territory at 47.4, even as service sector activity continued to expand and price pressures mounted. Markets anticipate a July Non-Farm Payrolls (NFP) gain of around 80,000, with the unemployment rate holding steady at 4.2%.
Nevertheless, the threat of interest rate hikes has not entirely vanished. Federal Reserve Governor Lisa Cook affirmed her readiness to support monetary tightening should inflation fail to moderate soon. The surge in the services sector price index to 70.3 also indicates that cost pressures remain high, leaving the Fed with no room to overlook inflation risks.
Newsmaker Analysis: Gold momentum remains bullish as long as the price holds above US$4,250. A strong breakout above the US$4,285–US$4,300 range could pave the way for gains toward US$4,330–US$4,350. Conversely, a failure to surpass US$4,300 could trigger profit-taking, pushing the price down to US$4,250 and subsequently to the US$4,220–US$4,200 level. Weaker-than-expected NFP data could extend the rally, whereas strong NFP figures and high wage growth might boost the dollar and trigger a correction in gold prices. (gn)
Source: Newsmaker.id
