Gold continued its upward trend, reaching a two-day peak of $4,106 and advancing by approximately 0.75%. This surge was primarily driven by decreasing oil prices and lower US Treasury yields, alongside an improved market sentiment stemming from expectations of the Strait of Hormuz reopening. West Texas Intermediate (WTI), the US oil benchmark, saw a nearly 5% drop, settling at $76.09 per barrel, which in turn caused the US 10-year T-note to fall by 10 basis points to 4.687%. These developments collectively fueled expectations of lower inflationary pressures.
The prospect of the Strait of Hormuz reopening has also put downward pressure on the US Dollar Index (DXY). This, combined with the softened inflation outlook, has led to a re-evaluation of the Federal Reserve's monetary policy. The CME FedWatch Tool indicated that the probability of a September Fed rate hike has fallen to 57.1% from 67.2% a day earlier. Money markets are now pricing in a nearly 59% chance of a rate hike at the September 16 meeting and 83% for the December meeting.
Adding to the market's perspective, recent US labor market data has shown a slight weakening. US JOLTS Job Openings in June fell to 7.359 million from 7.594 million, missing the forecast of 7.4 million. Traders are now keenly awaiting the ADP Employment Change on Wednesday and the Nonfarm Payrolls (NFP) report on Friday for further indications of the US labor market's health. Softer labor figures could further diminish expectations of Fed rate hikes, providing additional support for gold. New York Fed President John Williams, while optimistic about inflation easing, affirmed the Fed's readiness to raise rates if inflation persists.
