Gold price (XAU/USD) attracts some sellers to around $4,060 during the Asian trading hours on Monday. The precious metal declines amid uncertainty surrounding US-Iran talks and hawkish Federal Reserve (Fed) expectations. The US Nonfarm Payrolls (NFP) data will take center stage later on Thursday.
The United States (US) and Iran agreed to halt attacks and plan to meet in Doha, Qatar, on Tuesday to resolve their dispute over the Strait of Hormuz, Axios reported. US officials stated that Washington and Tehran “will stand down for now” following an exchange of fire near the critical waterway over the last several days.
However, uncertainty remains high as Iran’s Foreign Minister Abbas Araghchi said that responsibility for the Strait of Hormuz lies solely with Tehran. An Iranian official warned that any attempt to bypass its preferred route in the waterway will cause “tension and escalation.” Any signs of rising tensions in the Middle East could raise inflation worries, prompting traders to raise their bets on rate hikes and weighing on the non-yielding bullion.
Traders are now pricing in nearly a 59.7% chance of a rate hike as early as September 2026, according to the CME FedWatch Tool. The upcoming NFP and labor market reports on Thursday will offer some hints about the US interest rate path. Economists forecast an increase of 114,000 jobs in June and the Unemployment Rate holding steady at 4.3% during the same period.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.