Lower fuel prices after U.S. efforts to secure an Iran ceasefire and protect Persian Gulf trade cooled inflation concerns, while softer Treasury yields and Chinese institutional buying supported bullion.
Gold traded above $4,250 per ounce on Thursday, maintaining this week's rally at a seven-week high as falling energy prices reduced confidence that the Federal Reserve would need to raise interest rates this year. U.S. officials signaled they were pursuing a ceasefire with Iran and an agreement to protect trade through the Persian Gulf, helping drive fuel prices sharply lower since the start of August and easing worries that energy costs would feed into underlying consumer prices. Treasury yields also moved lower, improving the appeal of bullion (physical gold) by reducing the opportunity cost of holding an asset that pays no interest. At the same time, data from clearing institutions showed institutional investors in China continued to add long positions (bets on higher prices) in gold-backed assets, seeking safety from volatility in tech stocks and taking support from recent strength in the physical market, which has been underpinned by central banks.