Gold Retreats From Seven-Week High Amid US-Iran Peace Deal Hopes

Gold has pulled back from its seven-week high as bulls struggle to find acceptance above $4,300. The precious metal rose to its highest level since June 18 during the Asian session on Thursday, driven by hopes of a potential US-Iran peace deal and the reopening of the Strait of Hormuz.

The easing of inflation fears has forced traders to scale back their bets for a more aggressive tightening by the US Federal Reserve (Fed). This has kept US Treasury bond yields and the US Dollar (USD) depressed, supporting gold. The Automatic Data Processing (ADP) reported that private-sector employment in the US grew by 40K in July, missing consensus estimates and leading to a slowdown in Fed rate hike expectations.

However, prominent Fed officials have warned that persistent inflation risks could necessitate further interest rate hikes. Fed Governor Lisa Cook stated that inflation remains too high and she is prepared to act if disinflation stalls, while San Francisco Fed President Mary Daly noted that officials need more data before the September meeting to see if inflation is temporary or lasting.