Gold Hits 4-week High

Gold traded around $4,450 an ounce on Thursday and was down almost 2% for the week, weighed down by growing expectations that central banks may need to raise interest rates to counter an energy-driven inflation shock stemming from the Middle East conflict. Hopes for a peace agreement also faded after the US and Iran exchanged strikes, with Bahrain and Kuwait caught in the crossfire during the most serious escalation since the ceasefire took effect in early April. The prolonged conflict and the near-shutdown of the crucial Strait of Hormuz have kept energy prices elevated, fueling inflation concerns and reinforcing expectations of tighter monetary policy. In the US, Cleveland Fed President Beth Hammack said the Fed could be forced to raise rates soon if inflation pressures continue to intensify. Investors are now focused on Friday’s nonfarm payrolls report for further clues on the Fed’s policy outlook.

Gold prices fell below $4,500 per ounce on Wednesday, edging closer to the March lows touched last week, as expectations grew that central banks may need to adopt a more hawkish stance and keep interest rates higher for longer. Sentiment was also weighed by continued uncertainty over a US-Iran agreement to end the conflict. At the same time, oil prices extended their gains, further stoking concerns about inflationary pressures. In the US, recent labor market data point to an acceleration in employment growth, consistent with earlier ADP and JOLTS reports. As a result, markets now ECB is expected to raise borrowing costs next week, with traders also pricing in another 25-basis-point hike in September. Although gold is typically viewed as a hedge against inflation, it tends to lose appeal as a non-yielding asset when interest rates are high.

Gold prices fell below $4,500 per ounce on Wednesday, extending losses from earlier in the week as stronger-than-expected US labor market data reinforced expectations that the Federal Reserve may keep interest rates elevated for an extended period. Data released on Tuesday showed US job openings surged in April to their highest level in nearly two years, while layoffs declined, pointing to continued resilience in the labor market. Investors are now focused on Friday’s closely watched nonfarm payrolls report for further clues on the trajectory of monetary policy. Meanwhile, ongoing uncertainty surrounding US-Iran peace negotiations contributed to higher oil prices, fueling concerns about inflation and strengthening the case for a more restrictive Fed stance. Still, President Donald Trump stated that talks remain underway, while reports suggest Iranian officials are reviewing a “final text” that could be submitted to the US as negotiations continue.