Gold prices are still experiencing weak price movements around $4,100 as investors assess the progress of negotiations between the United States (US) and Iran and expectations for the direction of the Federal Reserve's (Fed) monetary policy.
At 9 am, gold prices were trading at $4,080, stable since it opened early Wednesday in the Asian session.
Market sentiment remains cautious as geopolitical uncertainties in the Middle East have not subsided, while attention also shifts to the US jobs report to be published on Friday.
Hopes for US-Iran Negotiations
Media reports state that US Secretary of State Marco Rubio announced that there is progress in discussions with Iran and Oman to reopen shipping routes in the Strait of Hormuz. However, to date, no final agreement has been reached.
In the same development, US Treasury Secretary Scott Bessent said Washington has the potential to reach an agreement with Tehran in the near future to allow the strategic waterway to reopen.
This development has the potential to reduce concerns about global energy supply disruptions, thus easing inflationary pressures. This could reduce expectations that the Fed will need to raise interest rates more aggressively, thus providing some support to gold that does not offer interest returns.
Volatility Remains High, Fed in Focus
Despite the positive developments, tensions in the Middle East are not over yet as direct talks between the US and Iran are still ongoing.
Qatar's Foreign Ministry said that efforts to resolve the conflict are currently at a very positive stage, and a draft of a potential agreement is reportedly being circulated. However, the two countries have not yet officially started negotiations.
At the same time, the market is currently placing about a 60% probability that the Fed will raise interest rates at its September meeting based on CME FedWatch data.
US Jobs Data to Set Gold's Direction
Investors' attention is now focused on the US Non-Farm Payrolls (NFP) jobs report to be published on Friday, which is expected to be the main driver of market movement.
Data showing weakness in the US economy has the potential to boost demand for gold as it could reduce the Fed's need to continue tightening monetary policy.
TD Securities analyst Bart Melek said any indication that the US economy is slowing is expected to support gold prices as it reduces the likelihood of the central bank continuing to raise interest rates.
