Investing.com — was slightly lower on Thursday, weighed down by a firmer and rising . Bullion surged in the previous session, posting its best day since early February, amid optimism over an imminent deal to reopen the critical Strait of Hormuz.
Meanwhile, advanced amid a bond sell-off a day ahead of key labor market data that could shape monetary policy outlook.
At 15:30 ET (19:30 GMT), shed 0.3% to $4,236.42/oz, while gold futures slipped 0.2% to $4,295.30/oz.
Oil prices march higher
Gold had advanced this week, as investors moved away from the safe haven dollar and chose to pile into risk assets such as equities, helping Wall Street bounce back from a middling July and kick off August on a stellar note. Sliding oil prices on hopes for an imminent deal to reopen the critical Strait of Hormuz had supported sentiment.
But crude made solid gains on Thursday, after a media report said an Iranian and Omani framework to reopen the Strait of Hormuz would prohibit passage of U.S. vessels until compensation was paid.
Iran’s Fars News said the initial text of the Hormuz plan was under review by authorities, citing parliament member Alireza Salimi. According to the plan, passage of U.S., Israeli, and other hostile vessels through the vital waterway would be prohibited until compensation was paid, Fars said.
The news agency separately reported that according to the plan, entry into the strait would be through the northern corridor near the Iranian coast and exit would be through the southern corridor near the Oman coast, citing an informed source in the foreign ministry. After a specified deadline, transit through both corridors would be stopped and would instead take place through a middle corridor, with Iran managing the entry and jointly managing the exit with Oman.
If true, these aspects of the plan would most likely be unacceptable to Washington.
President Donald Trump earlier this week said he had called off a powerful planned attack against Iran due to progress towards a deal, while warning that Washington was “ready to go” if an agreement was not reached. Both sides have engaged in a cycle of threats, attacks, and concessions since the onset of their war in late-February.
Yields climb ahead of jobs report
Gold was also under pressure on Thursday by jitters over the path of monetary policy, with the dollar strengthening and traders dumping government bonds and driving up U.S. Treasury yields. Friday’s July nonfarm payrolls (NFP) report will likely provide the next marker for interest rates. Labor market indicators this week have been mixed so far.
U.S. job openings growth in June came in lower than expected and moderated from May. Separately, private employment growth in July arrived softer than anticipated and decelerated from June. On the other hand, the number of Americans filing for initial jobless claims remained below 200k for a third straight week, a streak not frequently seen since the late 1960s.
The data suggested that the overall labor market remained resilient and supported the Federal Reserve’s recent switch to focusing more on its inflation mandate. Volatility in oil prices due to the ongoing conflict in the Middle East has upended inflationary dynamics and has caused division among Fed policymakers as to the appropriate path of monetary policy.
“We’ll note that although other U.S. data had been robust in recent days, yesterday’s U.S. ISM services came in slightly below expectations and ADP payroll growth fell to 44k in July (from 95k, revised, in June). That’s raised small doubts as to whether NFPs can be above the consensus of 80k. But of course, the Fed is likely to be more interested in the unemployment rate and the hourly earnings report,” Thierry Wizman, global FX and rates strategist at Macquarie, said.
“In any case, because of the weaker U.S. data, the implied probability of a September Fed Funds rate target hike has fallen a bit, to roughly 55% in the USD OIS market as of this morning. That’s a decline from roughly 70% at end-July, and also accounts for the weaker USD this week. As for the Fed’s own discourse, we maintain that it has tilted toward a hawkish bias,” he added.
Roushni Nair, Scott Kanowsky, and Jaiveer Shekhawat contributed to this article