Gold gains more than 1% as softer oil prices ease inflation worries

Gold rose more than 1% on Monday as softer oil prices eased inflation concerns, while investors awaited key U.S. inflation data and fresh signals from the Federal Reserve on its policy outlook.

Spot gold climbed 1.6% to $4,129.69 per ounce, while U.S. gold futures for December delivery rose 1.6% to $4,139.00. Bullion gained about 5% last week.

Oil prices fell after U.S. President Donald Trump said he was highly unlikely to order further attacks on Iran as talks to end the conflict continued, easing concerns about potential supply disruptions.

Lower oil prices can ease inflationary pressures and reduce expectations that interest rates will stay higher for longer, lowering the opportunity cost of holding non-yielding bullion.

“Trump’s more conciliatory tone toward Iran is helping keep a lid on oil prices, which in turn eases some of the inflation pressure that had been weighing on the metal along with a modest pullback in the dollar,” said Tim Waterer, chief market analyst at KCM Trade.

The U.S. dollar softened, making greenback-priced bullion more affordable for buyers overseas.

Meanwhile, U.S. job growth accelerated in October and the unemployment rate fell to 4.1%, reinforcing expectations that the labour market remains resilient and keeping the Fed on track for a December interest-rate increase.

Traders currently see a 79% chance that the Fed will raise rates in December, up from 71% prior to the payrolls data, according to CME’s FedWatch tool.

Market participants now await the U.S. Consumer Price Index data due on Tuesday and the Producer Price Index on Friday to further gauge the Fed’s monetary policy stance.

“Any hot readings would likely firm the dollar and lift the odds of a December rate hike, which would quickly put gold back on the defensive,” Waterer said.

Among other metals, spot silver climbed 2.8% to $53.31 per ounce, platinum gained 1.6% to $1,556.14 and palladium rose 2.1% to $1,044.28.