Hopes Regarding Hormuz Push Gold Past US$4,100
Gold prices extended their gains for a third consecutive day during Asian trading on Wednesday. Spot gold rose approximately 1.3% to the US$4,127 per troy ounce range, while US futures contracts strengthened to around US$4,184. Silver also surged nearly 2% to the US$60.64 per ounce level.
The rise in precious metals was driven by hopes for an interim agreement to reopen the Strait of Hormuz. Qatar stated that a draft proposal has been prepared, while talks involving the United States, Iran, and Oman are reportedly making continued progress.
This optimism kept oil prices near three-week lows. Brent crude hovered around US$79.62 per barrel, while WTI traded near US$75.90. Cheaper oil has the potential to ease inflationary pressures and reduce the need for the Federal Reserve to raise interest rates aggressively.
Market expectations regarding a Federal Reserve rate hike have begun to decline. Market participants estimate the probability of a September rate hike at around 59%, down from 67% the previous day. Diminished expectations for monetary tightening serve as a positive factor for gold, as the metal does not yield interest.
However, the direction of Fed policy remains uncertain. Philadelphia Fed President Anna Paulson raised the possibility of policy adjustments if inflation fails to show progress, whereas Kansas City Fed President Jeff Schmid believes higher interest rates are still necessary to bring inflation back toward the 2% target.
Additional support came from a weakening dollar and increased buying by Chinese institutional investors. Inflows into Chinese gold ETFs have reportedly continued for 14 consecutive days, helping to keep prices above the psychological level of US$4,000 per ounce.
Newsmaker Analysis: Gold's short-term trend has turned bullish again after breaking through the US$4,100 level. As long as the price holds above the US$4,100–US$4,080 range, there is potential for a rise toward US$4,150, followed by US$4,180–US$4,200. However, a failure to maintain the US$4,100 level could trigger a correction toward US$4,070–US$4,050. While a Hormuz agreement might reduce safe-haven demand, falling oil prices and interest rate expectations remain key supports for gold.
Source: Newsmaker.id
