Gold gains as lower oil prices ease inflation fears

Gold prices rose on Monday as lower oil prices helped ease inflation concerns, according to Reuters. Reuters reported that spot gold rose 0.9% to $4,102.25 per ounce by 1125 GMT, while US gold futures for December delivery also gained 0.9% to $4,111.60. Bullion had gained about 5% the previous week after Democrats won control of both chambers of Congress in the US midterm elections. According to Reuters, that election result raised hopes for an end to the US-Israeli war with Iran. Oil prices fell on Monday after US President Donald Trump downplayed the likelihood of new strikes on Iran, though attacks on ships near the Strait of Hormuz kept supply concerns in focus.

Independent financial markets analyst Nikos Tzabouras stated, "Gold is rising on lower oil prices, a softer dollar and easing bond yields. The Democratic sweep has sparked optimism for a US-Iran resolution and could bring more scrutiny of the AI boom, which would help contain inflation and temper Fed tightening." Kitco noted that the Democratic Party's sweeping victory created positive momentum, pushing gold prices from around $3,900 an ounce after election day to a high of $4,145. However, Kitco observed that political developments remain a secondary concern as monetary policy dominates investor sentiment, with investors watching critical support at $4,000 an ounce.

CNBC and Bloomberg.com reported that gold previously dropped as strong U.S. payrolls boosted the dollar and yields. Reuters noted that gold prices fell 0.3% on Friday following stronger-than-expected US payrolls data that reinforced expectations the Federal Reserve could keep interest rates higher for longer. According to CME's FedWatch tool cited by Reuters, traders see about an 81% probability that the Fed will raise rates in December, which is higher than the 73% chance before the jobs data. Kitco stated that higher interest rates and elevated bond yields increase the opportunity cost of holding the non-yielding precious metal.

Market focus has turned to upcoming US consumer price data on Tuesday and producer price figures due on Friday. Tzabouras stated, "CPI and PPI will be pivotal for gold’s trajectory. Persistent inflation would bolster the case for additional Fed tightening and weigh on bullion, while any downside surprise could fuel a further rebound." Additionally, Reuters reported that China's central bank added about 25.8 metric tons of gold to its reserves in October, representing its largest monthly purchase in three years according to World Gold Council data. Among other metals mentioned by Reuters, spot silver climbed 1.4% to $52.62, platinum gained 0.6% to $1,541.72 and palladium rose 0.5% to $1,028.88.