Gold Reclaims Gains After Jobs Data

Gold rose above $4,300 an ounce on Thursday, recovering losses from the previous session after President Donald Trump signed an interim agreement to end the conflict with Iran and reopen the Strait of Hormuz. Reports indicated that the deal includes the swift reopening of the strait and the removal of sanctions on Iranian oil exports, while negotiations on nuclear issues and potential additional economic incentives for Iran are set to continue. Meanwhile, gold tumbled nearly 2% on Wednesday after the US Federal Reserve signaled increasing support for interest rate hikes this year. Fed Chair Kevin Warsh refrained from providing guidance on the next policy move but stressed that inflation has remained above the central bank’s 2% target for several years and reiterated the Fed’s commitment to restoring price stability.

Gold held below $4,300 per ounce on Thursday after falling nearly 2% in the previous session, as the US Federal Reserve signaled growing support for interest rate hikes this year. Half of FOMC members indicated that it may be necessary to raise rates this year, consistent with the expectations that core inflation will be higher than expected due to the impact of the war in the Middle East. Meanwhile, new Fed Chair Kevin Warsh declined to offer guidance on the next policy move but emphasized that inflation has remained above the central bank’s 2% target for several years and reaffirmed the Fed’s commitment to bringing price growth under control. On the geopolitical front, the US and Iran digitally signed their interim peace agreement, although it remains uncertain whether Iran has already begun steps to fully reopen the Strait of Hormuz.

Gold prices swung lower to $4,275 per ounce on Wednesday, halting a four session rally after the Federal Reserve held rates unchanged, as expected, and signaled the possibility of a rate hike this year. Half of the FOMC projected that it may be necessary to raise interest rates this year, consistent with the expectations that core inflation will be higher than expected due to the impact of the war in the Middle East. The Fed previously signaled it has leeway to prioritize price stability as the latest labor market data reflected a resilient labor market. Precious metal prices fell as shorter term Treasury yields surged, raising the opportunity cost to allocate in bullion instead of interest-bearing securities. Meanwhile, safe-haven demand was lower as both the US and Iran maintained their intention to sign an agreement to suspend hostilities and restore energy trade on Friday. Major central banks in Europe maintained their rates unchanged, although BoJ raised rates as expected.