Gold jumped 4.5% on Wednesday, its best one-day gain in six months, as hopes for a Middle East de-escalation and weak U.S. jobs data weighed on oil and the dollar. Traders trimmed the odds of a September Federal Reserve rate hike to around 57% as the rally pushed the metal further from its multi-week base near $4,000.
Gold jumped $169 to trade near $4,245 on Wednesday. The metal rose 4.5%, one of its biggest one-day gains since the global financial crisis and its best day in six months. Reuters/LSEG data show gold's last close below $4,000 came in November, despite a few intraday dips beneath that level since June.
Hormuz de-escalation drags oil lower
Washington signaled that a deal to reopen the Strait of Hormuz could be reached as early as Wednesday. Qatar disclosed Tuesday that the U.S. and Iran had drafted an interim proposal covering the waterway, which carries a fifth of the world's oil. The U.S., Iran and Oman are reportedly working on a temporary 60-day shipping arrangement, and U.S. Central Command declared the southern route free and open.
Crude fell almost 6% during Tuesday's session and has now dropped for three straight days, with West Texas Intermediate trading around $76.29. Lower oil compresses the inflation outlook, which reduces the odds of further Federal Reserve tightening and lowers the opportunity cost of holding a non-yielding asset like gold.
Weak payrolls add to the case for a Fed pause
A separate report showed private payrolls rose just 44,000 in July, below a consensus of 75,000, with June's gain revised down to 95,000 from 98,000. The Dollar Index slipped to 99.66 on the print, making gold cheaper for buyers outside the U.S.
Traders now put the odds of a September rate hike at around 57%, down from about 65% a day earlier, as Hormuz reopening headlines eased the inflation risk premium priced into short-term rates. The Federal Reserve left rates unchanged at 3.50% to 3.75% in July, with three officials dissenting in favor of further tightening.
Sources: Economy News, Investinglive RSS Breaking News Feed, Commodities Analysis & Opinion
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