Spot gold jumped 4.4% to $4,258.18 an ounce on Wednesday, its best one-day gain since early February, as a weakening dollar and hopes for a U.S.-Iran deal to reopen the Strait of Hormuz drove buying. Traders also pared Federal Reserve rate-hike bets after this week's U.S. economic data releases.
Gold hit its highest level in over a month on Wednesday, lifted by a sliding dollar and hopes that the U.S. and Iran are close to a deal reopening the Strait of Hormuz. The rally marked the metal's best single-day performance since early February.
At 14:36 ET (18:36 GMT), spot gold surged 4.4% to $4,258.18 an ounce. Gold futures, meanwhile, jumped 4% to $4,317.07 an ounce. Both contracts touched their highest levels since June 17.
Hormuz diplomacy fuels gold's rally
Several U.S. officials, including President Donald Trump, said a deal to reopen the Strait of Hormuz was close. Trump told reporters Tuesday evening: "We'll know in 48 hours, I would say."
Iran's foreign ministry said talks between Tehran and Oman over the strait were ongoing. Spokesperson Esmaeil Baqaei said a joint statement was in final review and drafting, provided outside parties did not interfere, and attributed the strait's closure to what he called the U.S.'s military aggression. Iran's state media added that Washington would need to return to commitments made under an interim peace deal signed in June as a condition for reopening the strait, citing deputy foreign minister for legal and international affairs Kazem Gharibabadi.
Fed rate bets shrink as oil slides
Oil seesawed on Wednesday but stayed deep in weekly losses, and the pullback prompted traders to scale back Fed tightening bets. Markets now price in just one U.S. rate increase by the end of the year, down from two hikes expected as recently as last week. Lower rates could lift gold by cutting the opportunity cost of holding the non-yielding metal.
José Torres, senior economist at Interactive Brokers, said a drop in oil below $70 would widen the path to a 2-handle Consumer Price Index by year-end and boost equities and Treasuries alike. The U.S. dollar index also hit a seven-week low on Wednesday, making dollar-denominated bullion cheaper for overseas buyers.
Soft jobs, firmer services keep Fed cautious
U.S. private employers added 44,000 jobs in July, according to ADP, well below the 68,000 estimated and a slowdown from June's 95,000. The reading echoed a similar cooling trend in June's job openings data released Tuesday, and comes two days before Friday's nonfarm payrolls report.
Even so, the broader labor market picture remains resilient, supporting the Fed's recent shift toward focusing more on its inflation mandate. Oil-price volatility tied to the Middle East conflict has scrambled inflation dynamics and divided Fed policymakers over the path for rates.
Separately, the Institute for Supply Management's services index rose to 54.1 in July from June's 54 reading, against a forecast of 54.5. Its prices index, which tracks costs services firms pay for materials and inputs, accelerated from June and stayed above 70 for the fourth time in five months.
Source: Investing.com
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