Gold Prices Rise as Falling Oil Prices Ease Inflation Concerns Ahead of US Economic Data

Gold prices rose on Monday as declining oil prices helped ease concerns about inflation, while investors awaited key economic data from the United States that could influence the Federal Reserve’s next interest rate decision.

Spot gold increased by 0.7 per cent to $4,094.43 per ounce as of 9:18 a.m. GMT, while US gold futures for December delivery also gained 0.7 per cent to trade at $4,103.60 per ounce.

The precious metal recorded an impressive 5 per cent gain last week following the victory of the Democratic Party in the US midterm elections, which raised hopes of a possible resolution to the ongoing conflict in the Middle East.

Oil prices declined on Monday after US President Donald Trump reportedly played down the possibility of launching further military strikes against Iran.

However, continued attacks on vessels near the Strait of Hormuz maintained concerns about potential disruptions to global oil supplies.

Market analysts attributed gold’s latest gains to falling oil prices, a weaker US dollar and declining bond yields.

Nikos Tzabouras, an independent financial markets analyst, said the Democratic Party’s electoral victory had encouraged optimism about a possible resolution to the US-Iran conflict.

He added that increased scrutiny of the artificial intelligence boom could also help contain inflation and reduce pressure on the Federal Reserve to tighten monetary policy.

The weakening US dollar also supported gold prices by making the dollar-denominated commodity more affordable for investors holding other currencies.

However, gold recorded a 0.3 per cent decline on Friday after stronger-than-expected US employment figures strengthened expectations that the Federal Reserve could maintain higher interest rates for an extended period.

Data showed that US employers added 165,000 jobs in October, while the unemployment rate declined to 4.1 per cent, indicating continued strength in the country’s labour market.

According to the CME FedWatch tool, traders now estimate an 81 per cent probability that the Federal Reserve will increase interest rates in December, compared with 73 per cent before the release of the employment figures.

Although gold is traditionally regarded as a hedge against inflation, rising interest rates generally reduce its attractiveness because the precious metal does not generate interest or dividends.

Investors are now turning their attention to the US Consumer Price Index (CPI), scheduled for release on Tuesday, and the Producer Price Index (PPI), expected on Friday.

The two economic reports are expected to provide further insight into inflationary pressures in the United States and help determine the Federal Reserve’s approach to interest rates in the coming months.

Tzabouras noted that the inflation figures would play a significant role in determining gold’s next price movement.

He explained that persistent inflation could strengthen the argument for further interest rate increases, potentially putting pressure on gold prices.

However, lower-than-expected inflation figures couldis encourage additional gains in the precious metal.

Meanwhile, othes precious metals also recorded gains on Monday.

Spot silver increased by 1.2 per cent to $52.51 per ounce, while platinum gained 0.8 per cent to $1,545.87. Palladium also advanced by 0.9 per cent to trade at $1,033.24 per ounce.

Investors are expected to closely monitor developments in the Middle East, movements in global oil prices and upcoming US inflation data for further direction in the precious metals market.

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