Precious Metals Afternoon: Diplomatic Efforts Continue, Gold Rises as Investors Await Weekly Employment Report

Gold rose on Tuesday (4th) as declining oil prices eased inflation concerns and diminished the likelihood of a Federal Reserve (Fed) rate hike, while markets await multiple employment reports this week to find further clues on the interest rate outlook.

Spot gold increased by 0.8%, reaching $4,086.36 per ounce.

August-delivery gold futures closed up 1.5% at $4,152.60 per ounce.

Statements from Qatari and U.S. officials heightened hopes for a diplomatic resolution to the Iran conflict and improved prospects for navigation through the Strait of Hormuz, causing oil prices to drop over 5% to a three-week low.

Bart Melek, Global Head of Commodity Strategy at TD Securities, said the decline in oil prices could be one factor supporting gold prices, as it slightly lowers short-term interest rate expectations in several ways.

When energy prices surge, the Fed may keep interest rates higher for longer to curb inflation, which would hurt non-yielding gold.

New York Federal Reserve President John Williams said earlier on Monday that he remains optimistic about the gradual easing of inflationary pressures, but the Fed will not hesitate to raise rates if conditions worsen.

After a dissenting vote emerged at the Fed's July meeting, traders are currently pricing in about a 57% chance of a rate hike in September.

Market participants are awaiting a series of employment data this week, including the ADP employment change and the official non-farm payrolls report.

Other precious metals trading:

- Spot silver rose 2.8% to $59.82 per ounce. - Spot platinum surged 7.1% to $1,742.63 per ounce. - Spot palladium jumped 7.1% to $1,354.27 per ounce.

Independent analyst Ross Norman said: "Platinum group metals are broadly benefiting from the potentially easing Iran situation. As industrial metals, their fortunes are closely tied to the recovery of traditional oil demand."