Gold Holds Near 7-Week High as Traders Weigh Iran Tensions and Fed Outlook

Gold prices held steady near a 7-week high on Monday (10th), as investors took profits after last week’s strong rally, while markets closely monitor upcoming U.S. inflation data for further clues on the Federal Reserve’s (Fed) interest rate trajectory.

As of 13:29 Taipei time, spot gold dipped about 0.2% to around $4,333 per ounce, while U.S. gold futures slipped to $4,390. Market analysts noted this is a natural stabilization following a sharp price rise, not a major shift in sentiment, and expect gold to remain supported above $4,300 in the short term.

Gold hit a fresh six-week high last Friday, driven by weaker-than-expected U.S. non-farm payrolls data for July, which not only signaled rising unemployment but also saw significant downward revisions to employment figures for the prior two months. The disappointing labor data prompted markets to sharply scale back expectations for a September rate hike, with futures now pricing in less than a 50% chance. As gold yields no interest, a lower-rate environment reduces the opportunity cost of holding the metal, boosting its appeal.

Market focus this week turns to Wednesday’s release of the Consumer Price Index (CPI) and Producer Price Index (PPI). Should inflation data show further softening, it would strengthen expectations for a less restrictive Fed policy, supporting further upside in gold prices.

Additionally, geopolitical risks continue to support safe-haven demand. Iran stated it is nearing an agreement with Oman to define new shipping lanes through the Strait of Hormuz, but reiterated that the strategic waterway would only reopen if the U.S. meets several conditions.

Analysts warn that while uncertainty supports gold prices, any escalation leading to a surge in oil prices could pressure inflation, potentially affecting the Fed’s pace of easing.