Gold hits seven-week peak as market participants weigh Hormuz reopening prospects

Gold rose for a fourth session on Thursday and touched its highest level in seven weeks, helped by a softer dollar, while market participants assessed the chances of the Strait of Hormuz reopening.

Spot gold was up 0.2 percent at $4,254.98 per ounce by 0636 GMT, after earlier hitting its highest level since June 18. On Wednesday, bullion posted its biggest daily gain since February.

US gold futures rose 0.2 percent to $4,312.80.

“The sharp rally came on building optimism that a diplomatic breakthrough in the Middle East is close to being finalized. This in turn would keep downside pressure on oil prices and reduce the need for central banks to raise rates, providing a clear tailwind for gold,” IG market analyst Tony Sycamore said.

A sustained break above the 200-day moving average could pave the way for a stronger recovery toward the $5,000 mark, he added.

A proposed deal between Iran and Oman to help end five months of war between Iran and the United States would give Tehran control over ships entering the Gulf through the Strait of Hormuz, a senior Iranian source and two regional officials told Reuters.

Spot gold has declined 19 percent since the onset of the US-Iran conflict on February 28, due to fears of energy-driven inflation pushing interest rates higher. Gold tends to perform better in a low interest-rate environment as it yields no interest.

Market expectations for a September US rate hike have eased to 55 percent from 67 percent two days earlier.

The US dollar index was under pressure. A weaker US currency makes dollar-priced commodities cheaper for holders of other currencies.

Investors are awaiting the July US nonfarm payrolls report scheduled for release on Friday. The ADP national employment report showed that US private payrolls growth slowed in July.

A soft payrolls reading would add further support to gold, while a strong rebound could create short-term pressure as markets reassess the policy timeline, said Joshua Rotbart, founder of J. Rotbart & Co.

Among other metals, spot silver fell 0.5 percent to $61.78, platinum was up 0.8 percent to $1,755.18 after hitting its highest since June.

Palladium climbed 0.8 percent to $1,748.08, up for a third consecutive session.

Spot gold prices with 200 moving average.

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