Gold (XAU/USD) extended gains on Tuesday, rising approximately 0.75% to reach a two-day high of $4,106 per troy ounce, buoyed by growing optimism surrounding a potential diplomatic resolution in the Middle East and a broad decline in US Treasury yields, according to analysis published by FXStreet. The precious metal's advance was partly driven by speculation over a possible reopening of the Strait of Hormuz, a critical global oil transit chokepoint. An Iranian Foreign Ministry spokesperson confirmed that Iran and Oman are continuing discussions on the matter, as reported by IRIB, Iran's state broadcaster.
Tehran is reportedly assessing whether to permit European nations to clear mines from the Strait. Adding to the diplomatic momentum, US President Donald Trump reposted an article dated August 2 suggesting that a deal is imminent as Iran talks on denuclearisation resumed. The prospect of a Hormuz reopening weighed heavily on crude oil prices.
West Texas Intermediate (WTI), the US oil benchmark, fell nearly 5% to $76.09 per barrel. The sharp decline in oil prices is seen as a disinflationary signal, prompting markets to reassess the inflation outlook and pushing US Treasury yields lower. The US 10-year T-note yield fell by 10 basis points to 4.687%, creating a more favourable environment for gold, which bears no yield and tends to benefit from lower interest rates.
The US Dollar Index (DXY), which measures the dollar against a basket of six major currencies, edged down 0.05%, providing additional support to dollar-denominated gold prices. On the macroeconomic front, fresh labour market data offered a mixed picture. The US Job Openings and Labor Turnover Survey (JOLTS) for June declined from 7.537 million to 7.359 million, falling short of the consensus forecast of 7.4 million.
Analysts noted that the low number of layoffs indicates minimal hiring and firing activity, with roughly one vacancy per unemployed person, suggesting the labour market remains in broad equilibrium. Separately, the US Commerce Department reported that the trade deficit for June narrowed from $77.6 billion to $73.3 billion, slightly wider than the $73 billion estimate. Market attention is now turning to the ADP Employment Change report for July, with private sector hiring expected to come in at 70,000 jobs, down from 98,000 in June.
Investors will subsequently focus on weekly jobless claims on Thursday and the critical Nonfarm Payrolls release for July, where the US economy is forecast to have added 80,000 workers. Money markets, according to Prime Terminal data, are currently pricing in a nearly 59% probability that the Federal Reserve (Fed) will raise interest rates at its September 16 meeting. The odds rise to 83% for a rate hike at the December meeting, reflecting persistent concerns about inflation despite recent disinflationary signals from energy markets.
New York Fed President John Williams, speaking on Monday, struck a cautiously optimistic tone, expressing confidence that inflation pressures are expected to ease gradually. However, he underscored that the central bank stands ready to respond with further rate hikes should inflation fail to moderate as anticipated. From a technical perspective, gold is approaching the psychologically significant $4,100 level for the first time since the previous Friday.
The Relative Strength Index (RSI) is on the verge of crossing above the 50-neutral threshold, a signal that some traders interpret as a buy trigger. However, the broader market structure still reflects a series of lower highs and lower lows. A sustained break above the 50-day Simple Moving Average at $4,156, followed by the July 6 cycle high of $4,202, would be required to shift the technical outlook to neutral-to-bullish.
On the downside, a move below the August 3 daily low of $4,019 would expose the $4,000 level, with the June 17 low of $3,959 representing a further support target. Source: FXStreet, analysis by Christian Borjon Valencia.
Source: fxstreet.com