Gold prices climbed more than 1 per cent on Monday as falling crude oil prices eased concerns over inflation, while a softer US dollar provided additional support to bullion. Investors, meanwhile, remained cautious ahead of key American inflation data this week, which could influence expectations of the Federal Reserve's next interest-rate decision.
Spot gold rose 1.4 per cent to USD 4,123.46 per ounce by 0428 GMT. US gold futures for December delivery also advanced 1.4 per cent to USD 4,132.70. The gains followed a strong previous week, during which bullion rose approximately 5 per cent.
Lower oil prices support bullion
The decline in crude oil prices came after US President Donald Trump said he was highly unlikely to order further attacks on Iran as negotiations to end the conflict continued. His remarks eased concerns about potential disruptions to global oil supplies.
Lower oil prices can help contain inflationary pressures, reducing the likelihood of interest rates remaining elevated for an extended period. This is generally supportive of gold, which does not offer interest or dividend payments and becomes less attractive when yields on other assets rise.
Tim Waterer, chief market analyst at KCM Trade, said Trump's more conciliatory position towards Iran had helped limit oil prices and ease some of the inflationary pressure weighing on gold.
"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," Waterer said.
The US dollar also weakened, making bullion priced in the greenback relatively cheaper for investors holding other currencies and supporting demand in international markets.
Strong US jobs data complicates interest-rate outlook
Despite the support from lower oil prices and a softer dollar, expectations of tighter US monetary policy remain a concern for gold investors.
US employment data showed that job growth accelerated in October, while the unemployment rate declined to 4.1 per cent. The figures indicated continued resilience in the American labour market and strengthened expectations that the Federal Reserve could raise interest rates in December.
According to the CME FedWatch tool, traders were pricing in an 81 per cent probability of a December rate increase, compared with 71 per cent before the release of the payrolls data.
Higher interest rates generally weigh on gold because they increase the opportunity cost of holding non-yielding assets. A stronger dollar, which can accompany expectations of tighter monetary policy, can also make bullion more expensive for overseas buyers.
Investors are now awaiting the US Consumer Price Index (CPI) data scheduled for Tuesday and the Producer Price Index (PPI) figures due on Friday. The releases are expected to provide further clues about inflation trends and the Federal Reserve's policy direction.
Waterer warned that stronger-than-expected inflation readings could strengthen the dollar and increase expectations of a December rate hike, putting renewed pressure on gold.
"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," he said.
Gold's recovery follows recent market volatility
Monday's gains extended bullion's recovery after a period of volatility in international markets. Gold had retreated sharply from its record levels earlier in the year, with changing expectations around US interest rates, movements in the dollar and fluctuations in investor demand influencing prices.
A Reuters market analysis published on Sunday noted that gold had found support around USD 4,000 per ounce, although short-term movements remained sensitive to speculative trading, equity-market performance, crude oil prices and changing interest-rate expectations.
The analysis also highlighted continued support from central-bank purchases and investment demand. Central banks bought 321.2 metric tonnes of gold in the third quarter, the highest quarterly total since late 2024, while gold-backed exchange-traded funds recorded inflows of 19 tonnes in October.
These longer-term demand factors have provided support to the market even as investors navigate uncertainty over the Federal Reserve's next move.
Silver, platinum and palladium also advance
Other precious metals recorded gains alongside gold on Monday.
Spot silver climbed 2.5 per cent to USD 53.15 per ounce, while platinum advanced 1.3 per cent to USD 1,553.23. Palladium rose 2.1 per cent to USD 1,045.11.
The broader advance in precious metals came as investors assessed the impact of lower energy prices, currency movements and the outlook for US monetary policy.
With the CPI and PPI releases approaching, the direction of inflation and the likelihood of a December rate increase are expected to remain key drivers of bullion prices in the coming sessions.