Oil prices fell in the international market on Monday, while gold rose on the first day of the week (Monday is the first working day of the week in many Western and Asian countries). Several factors lay behind the moves.
US President Donald Trump has decided to hold off, for now, on renewed strikes on Iran, saying he hoped a settlement could be reached soon. Against that backdrop, oil prices fell on Monday. Brent crude dropped more than 5 percent to $83.33 a barrel.
After Trump’s announcement, fears of higher inflation and interest rates eased somewhat, which lifted gold as a safe investment.
At 0437 GMT, spot gold rose 0.7 percent to $4,068.54 an ounce. At the same time, US gold futures rose 0.9 percent to $4,066.60.
Meanwhile, Japan’s authorities intervened in the foreign-exchange market to support the yen, putting pressure on the US dollar. That made dollar-priced gold relatively cheaper for foreign buyers — another reason for gold’s rise.
Tim Waterer, chief market analyst at KCM Trade, said the gold market was in a positive position at the start of the week. But with uncertainty over the oil market and the Middle East situation, prices were unlikely to rise very far, he said — a positive start for gold, but with caution.
Trump said talks with Iran would take place on Monday, but he had not set a specific deadline for reaching a settlement. After his remarks, international oil prices fell more than 5 percent.
Gold has been under pressure since the US-Iran conflict began, amid fears that if the war raises inflation, central banks worldwide could raise interest rates. Although gold is traditionally seen as a safe hedge against inflation, its appeal fades when interest rates are high, since it yields no interest or regular income.
Several important US labour-market reports are due this week, including job-vacancy data, the ADP private-employment report, weekly jobless claims and the closely watched non-farm payrolls report. Investors will be watching these closely.
Waterer said that if fresh tensions in the Middle East pushed oil prices up again, or if the US employment report came in stronger than expected, the chance of a September rate rise could strengthen — in which case gold would not rise much.
Three officials who dissented in favour of a rate hike at the US Federal Reserve’s policy meeting last week said on Friday that unless short-term lending rates were raised quickly, inflation could stay stuck above the Fed’s 2 percent target.
Analysts at Standard Chartered said in a research note that gold prices would rise somewhat in the short term, ahead of a seasonal pickup in demand.
Among other precious metals, spot silver rose 1.4 percent to $58.46 an ounce. Platinum rose 0.5 percent to $1,650.63 and palladium rose 1.6 percent to $1,293.50.
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