Gold rose more than 1 percent 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, Reuters reported. Spot gold climbed 1.4 percent to 4,123.46 dollars per ounce by 0428 GMT, and US gold futures for December delivery also rose 1.4 percent to 4,132.70 dollars. A later Reuters update had spot gold up 0.7 percent at 4,094.43 dollars by 0918 GMT. Bullion gained about 5 percent last week.
The channel is oil. Crude fell after President Donald Trump said he was highly unlikely to order further attacks on Iran as talks to end the conflict continued, easing concerns about supply disruption. Lower oil prices can ease inflationary pressures and reduce expectations that interest rates will stay higher for longer, which lowers the opportunity cost of holding non-yielding bullion. Tim Waterer, chief market analyst at KCM Trade, told Reuters that Trump’s more conciliatory tone toward Iran is helping keep a lid on oil prices, which in turn eases some of the inflationary pressure, and a softer dollar added support.
The rally runs against the rate backdrop rather than with it. Friday’s stronger than expected US jobs report briefly sent gold down toward 4,033 dollars, and market pricing still puts the probability of a December Federal Reserve rate hike near four in five. Market participants now await the US consumer price index due on Tuesday and the producer price index on Friday to gauge the Fed’s policy outlook, Reuters said.