Gold Soars to Seven-Week High as Strait of Hormuz Hopes Boost Prices

Gold prices rebounded strongly on Thursday to reach a seven-week high of $4,265.22 an ounce, as hopes for progress in the Strait of Hormuz conflict weakened the US dollar and reduced expectations of higher interest rates.

The metal's four-session advance was driven by signs that Iran and Oman may reach an arrangement to restore shipping through the strait, which has pushed crude oil prices lower and reduced fears of inflation. A weaker inflation outlook has supported bonds and lowered the opportunity cost of owning gold.

Despite the rebound, gold remains about 19% below its level when the US-Iran conflict began on February 28. Traders have reduced the probability of a quarter-point Federal Reserve rate increase in September to roughly 55%, from about 67% earlier in the week.

Attention now turns to Friday's official US employment report, which economists expect will show nonfarm payrolls rising by about 83,000 after a 57,000 increase in June. A weaker result could extend gold's rebound by pulling yields and the dollar lower, while a stronger report would risk reviving rate-rise expectations.

IG market analyst Tony Sycamore views the 200-day moving average as the important test for gold, with the indicator near $4,490. Until then, the latest advance remains a rebound within a much larger correction from January's record high.