Gold climbs over 1% as cheaper oil cools inflation fears

what happened

Gold moved higher on Monday, rising more than 1% as a drop in crude prices lessened fears of rising consumer prices. Market attention also centred on upcoming US inflation figures and fresh guidance from the Federal Reserve. According to Reuters, spot gold was up 1.6% at $4,129.69 an ounce by 0220 GMT, while December US gold futures gained 1.6% to $4,139.00. The metal had risen roughly 5% over the previous week.

Crude fell after President Donald Trump indicated that new strikes on Iran were improbable while negotiations to end the conflict proceed, which reduced fears of supply interruptions. Lower energy costs ease price pressures and reduce bets that borrowing costs will stay elevated for longer, which lowers the appeal of holding bullion that pays no yield. A softer greenback also made the metal cheaper for overseas purchasers.

Stronger US employment figures added to the picture, as hiring picked up in October and unemployment slipped to 4.1%. Traders put the odds of a Fed rate increase in December at 79%, versus 71% before the jobs report, according to CME FedWatch. Spot silver advanced 2.8% to $53.31 an ounce, platinum rose 1.6% to $1,556.14 and palladium gained 2.1% to $1,044.28.

why it matters

Metals are trading along the chain running from oil to inflation to interest rates. A resilient labour market that keeps a December hike in play could weigh on gold again, analysts warn. The next checkpoints are the CPI release on Tuesday and the PPI report on Friday.

market impact

Gold and silver: cheaper oil eases inflation pressure and supports precious metals

• ▲Gold pressure up — cheaper oil reduces expectations of higher rates and inflation
• ▲Silver pressure up — follows gold higher and benefits from a softer dollar

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