Gold held a sharp gain as signs of progress in reopening the Strait of Hormuz eased energy-led pressure on the Federal Reserve to raise interest rates.
Bullion was trading around $4,260 an ounce, after jumping 4.1% in the previous session, the biggest rise since Feb. 3. Iran said it has reached agreement with Oman on a proposed shipping route through the strait, raising the prospect of some energy flows resuming through the critical waterway. Oil fell on the news.
The route would be temporary and remain active for “two to four months,” Iranian Deputy Foreign Minister Kazem Gharibabadi told domestic media, adding that “this understanding does not mean the full reopening” of the strait.
President Donald Trump said the US’s negotiations with Iran were ongoing and he will “see what happens,” adding he would prefer to make a deal with the Islamic Republic than end the war militarily. Earlier, he said a deal was possible as early as Wednesday US time.
Signs of progress in ending the more than five-month conflict has markets now fully pricing in a single US rate increase by year-end, down from two as recently as last week. Less monetary tightening is generally positive for precious metals including gold, which generate no yield.
However, Fed Governor Lisa Cook repeated on Wednesday that she is ready to raise rates if inflation doesn’t slow, warning the central bank may not have the luxury of waiting before it returns to its 2% target. Despite backing the decision to hold rates steady at the Fed’s July policy meeting, she cautioned that the longer inflation remains above the goal, the tougher it will be to rein it in.
Gold has fallen by nearly a fifth since the US-Iran war began in late February. The conflict sent energy prices soaring, stoked inflationary pressures and raised the likelihood that rates will stay higher for longer.
Separately, the Bank of Korea announced it is working with domestic producers, the Korea Exchange and the Korea Securities Depository to establish a framework to purchase gold refined in South Korea. The move would mark the bank’s first purchase of domestically produced gold, which local producers would otherwise export, since 1967.
Spot gold climbed 0.4% to $4,262.66 an ounce as of 7:31 a.m. in Singapore. Silver rose 0.1% to $62.14 an ounce, after jumping more than 4% in the previous session. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was marginally lower after ending Wednesday down 0.2%.
With assistance from Wendy Wells.
This article was generated from an automated news agency feed without modifications to text.
