Gold hits seven-week peak as market participants weigh Hormuz reopening prospects

Gold rose for a fourth session on Thursday and touched its highest level in seven weeks, helped by a softer dollar, while market participants assessed the chances of the Strait of Hormuz reopening. Spot gold was up 0.2% at $4,254.98 per ounce by 0636 GMT, after earlier hitting its highest level since June 18. On Wednesday, bullion posted its biggest daily gain since February. U.S. gold futures rose 0.2% to $4,312.80. "The sharp rally came on building optimism that a diplomatic breakthrough in the Middle East is close to being finalised. This in turn would keep downside pressure on oil prices and reduce the need for central banks to raise rates, providing a clear tailwind for gold," IG market analyst Tony Sycamore said. A sustained break above the 200-day moving average could pave the way for a stronger recovery toward the $5,000 mark, he added. A proposed deal between Iran and Oman to help end five months of war between Iran and the United States would give Tehran control over ships entering the Gulf through the Strait of Hormuz, a senior Iranian source and two regional officials told Reuters. Spot gold has declined 19% since the onset of the U.S.-Iran conflict on February 28, due to fears of energy-driven inflation pushing interest rates higher. Gold tends to perform better in a low interest-rate environment as it yields no interest. Market expectations for a September U.S. rate hike have eased to 55% from 67% two days earlier. The U.S. dollar index was under pressure. A weaker U.S. currency makes dollar-priced commodities cheaper for holders of other currencies. Investors are awaiting the July U.S. nonfarm payrolls report scheduled for release on Friday. The ADP national employment report showed that U.S. private payrolls growth slowed in July. A soft payrolls reading would add further support to gold, while a strong rebound could create short-term pressure as markets reassess the policy timeline, said Joshua Rotbart, founder of J. Rotbart & Co. Among other metals, spot silver fell 0.5% to $61.78, platinum was up 0.8% to $1,755.18 after hitting its highest since June. Palladium climbed 0.8% to $1,748.08, up for a third consecutive session.