Gold prices experienced a modest increase on Monday, driven by declining oil prices that alleviated inflation worries. However, the upward momentum was limited by prevailing expectations that the Federal Reserve will maintain elevated US interest rates for an extended period, particularly in light of strong payrolls data. Spot gold increased by 0.2% to $4,073.59 per ounce as of 0016, while US gold futures for December delivery also rose by 0.2% to $4,082.30. Bullion recorded a weekly increase of approximately 5% on Friday.
US President Donald Trump stated on Sunday that he is highly unlikely to authorise additional attacks on Iran, provided that negotiations aimed at resolving the conflict remain ongoing. This comes in the context of both nations reporting shipping disruptions in or near the Strait of Hormuz. Oil prices declined in response to the remarks. Meanwhile, US job growth accelerated in October, with the unemployment rate declining to 4.1%. This development reinforces expectations of a resilient labour market and suggests that the Federal Reserve is likely to proceed with an interest rate increase in December.
A stronger-than-anticipated US jobs report reinforced the argument for additional Federal Reserve interest rate increases, which had seen diminished momentum following a post-election stock market decline and rising concerns that a slowdown in AI-driven demand might undermine economic stability. Traders currently perceive a 79% probability that the Fed will increase rates in December, an increase from the 71% observed prior to the payrolls data, as indicated by CME’s FedWatch tool. Elevated interest rates heighten the opportunity cost associated with holding non-yielding bullion, thereby diminishing its attractiveness to investors.
In line with the prevailing global trend of tightening monetary policy, the Bank of Japan is anticipated to increase interest rates in December and persist in raising borrowing costs next year toward 2%, as stated by former BOJ chief economist Seisaku Kameda. Gold demand in India experienced an uptick at the onset of a significant festival on Friday, as prices fell to a seven-month low. This decline attracted bargain hunters who had been on the sidelines for months, anticipating a market correction. Among other metals, spot silver rose 0.9% to $52.32 per ounce, platinum gained 0.8% to $1,545.13, and palladium climbed 0.9% to $1,032.52.
