Gold price jumps with silver as markets track push to reopen Hormuz

Gold jumped, gaining for a third day as the prospect of an interim deal to reopen the Strait of Hormuz eased concerns about the outlook for inflation and reduced the odds of the Federal Reserve raising interest rates.

Bullion advanced by more than 3% to around $4,230 an ounce, after posting small gains in the first two sessions of the week, while silver also climbed. US President Donald Trump said a deal on the Strait of Hormuz is possible as early as Wednesday, as expectations build for an arrangement that allows for the reopening of the critical waterway. The dollar pushed lower while US oil extended losses.

Markets are now fully pricing in a single US rate increase by year-end, down from two as recently as last week. Less monetary tightening is generally positive for precious metals including gold, which generate no yield.

Gold’s rally gained momentum after prices broke above a key technical resistance level, catching up with platinum, which made a similar breakout a day earlier, according to Nicky Shiels, head of metals strategy at MKS PAMP.

Shiels expected gold and other assets investors often buy when they expect a weaker dollar or higher inflation to continue climbing ahead of the Fed’s September meeting. Gold spent much of the past few weeks trading sideways after a strong rally earlier this year, leaving room for prices to move higher again, she added.

Gold has fallen by about a fifth since the US-Iran war began in late February. The conflict has sent energy prices soaring, stoked inflationary pressures and raised the likelihood that rates will stay higher for longer. Still, Fed officials opted to keep policy unchanged for the fifth straight time when they met last week, although three dissenters favored a hike.

Separately, Federal Reserve Bank of Kansas City President Jeff Schmid suggested higher rates were needed to achieve the Fed’s price-stability goals, according to remarks prepared for an event in Omaha. Schmid, who does not vote on decisions this year, cautioned against assuming that inflation pressures stemming from supply shocks would be fleeting.

Meanwhile, Fed Governor Lisa Cook repeated a message that she is ready to raise rates if inflation doesn’t slow, warning that policymakers may not have the luxury of waiting before inflation returns to their 2% target. While Cook backed the decision to hold rates steady at the Fed’s July policy meeting, she cautioned that the longer inflation remains above the central bank’s goal, the tougher the job will be to rein it in.

Spot gold gained 3.8% to $4,231.79 an ounce at 10:19 a.m. in New York. Silver was 5.1% higher at $62.59 an ounce. Platinum was little changed and palladium advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, edged lower.

In recent weeks, some support for bullion has emerged from Chinese institutional investors, who have helped to arrest the war-led decline and keep prices above the key $4,000-an-ounce threshold.

Gold-backed exchange-traded funds in China saw 14 straight days of inflows up to Monday, the longest streak since March, according to calculations by Bloomberg. That may show a shift in sentiment in the world’s biggest bullion market after a long run of outflows and price declines.

(By Wendy Wells and Yvonne Yue Li)