Gold prices rose on Monday, supported by a weaker U.S. dollar and reduced expectations of a Federal Reserve rate hike, while investors continued monitoring geopolitical tensions in the Middle East.
Spot gold increased 0.9% to $4,417.24 per ounce by 1:34 p.m. EDT (1734 GMT). U.S. gold futures for December delivery settled 0.8% higher at $4,473.70.
Markets Price in Stagflation Concerns
The gold market appears to be reflecting expectations of a stagflationary environment, with weaker employment conditions and expectations that the Federal Reserve may tolerate current inflation levels, according to Bart Melek, global head of commodity strategy at TD Securities.
Melek highlighted the weakening U.S. dollar as a key factor supporting gold prices, with the currency falling to its lowest level in more than two months. A weaker dollar makes gold more affordable for buyers using other currencies.
Fed Rate Expectations Shift
Markets reduced expectations for a Federal Reserve rate increase following last week’s weaker-than-expected U.S. payrolls report and softer consumer inflation data.
Investors are now awaiting minutes from the Federal Reserve’s July meeting, scheduled for Wednesday, for further insight into the central bank’s policy outlook.
According to CME’s FedWatch Tool, traders see a 33% probability of a September rate increase, down from 51.2% a month earlier.
Gold does not pay interest, so lower interest rates typically support demand by reducing the opportunity cost of holding bullion.
Middle East Tensions Remain in Focus
Geopolitical risks continued to influence markets. A senior Iranian official told Reuters that Tehran would increase tensions in the Strait of Hormuz and across the region if diplomatic efforts with the United States fail.
Other Precious Metals Gain
Silver prices rose 2.1% to $66.01 per ounce. Platinum gained 1.3% to $1,770.30 per ounce, while palladium increased 1.1% to $1,326.92 per ounce.
