Gold Hits Seven-Week High as Mideast Deal Hopes Cool Fed Rate Hike Bets

Gold prices extended their rally for a fourth consecutive session on Thursday, reaching a seven-week peak as a potential diplomatic breakthrough in the Middle East tempered expectations for further Federal Reserve interest rate hikes.

Geopolitical Hopes Ease Inflation Fears

The primary catalyst for the rally came from reports of a potential agreement between Iran and Oman to reopen the Strait of Hormuz, according to Reuters. The prospect of an end to a five-month conflict that has disrupted global energy supplies sent oil prices lower.

Falling energy prices have a direct impact on inflation expectations, prompting investors to reassess the likely path of U.S. monetary policy. According to the source material, markets are now pricing in a 55% probability of a Fed rate hike in September, a significant drop from 67% just two days prior.

Market Impact

The shift in rate expectations, combined with a weaker U.S. dollar and easing Treasury yields, provided strong support for bullion. A softer dollar makes gold more affordable for international buyers, while lower bond yields reduce the opportunity cost of holding the non-yielding precious metal.

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Key price movements included:

• Spot gold (XAU/USD) rose 1.1% to $4,293.94 per ounce, after hitting an intraday high of $4,304.15.
• Gold futures (GC) gained 1.1% to settle at $4,353.12.
• Other precious metals also advanced, with spot silver up 0.5% and spot platinum climbing 2.3%.

Labor Data in Focus

Despite the gains, investors remain focused on upcoming U.S. economic data for further direction. Attention is now on Friday's nonfarm payrolls report, which will provide a critical update on the health of the labor market and heavily influence the Fed's next decision.

Analysts at ANZ noted that gold's rally accelerated after breaking a key technical resistance level, according to the source. However, Fed Governor Lisa Cook recently cautioned that policymakers remain prepared to raise rates if inflation does not slow, underscoring that the central bank's policy path is not yet set.