FX.co ★ Gold Steadies as Hormuz Deal Eyed

Gold held steady near $4,100 an ounce on Wednesday as investors adopted a cautious stance while weighing reports of a potential breakthrough to reopen the Strait of Hormuz. Such an agreement could ease inflationary pressures and reduce the likelihood of imminent interest rate increases by the Federal Reserve. On Tuesday, Qatar announced that an interim proposal had been drafted, and both Washington and Tehran indicated progress in talks on reopening Hormuz, prompting a sharp drop in oil prices. As a result, markets pared back the implied probability of a Fed rate hike in September to about 57%, from 67% the previous day.

Attention now turns to a new round of US labor market indicators for further guidance on the Fed’s policy trajectory, with ADP’s July private payrolls report scheduled for release later today. At the same time, gold-backed exchange-traded funds in China continued to see net inflows, as institutional investors remained committed to supporting bullion above the key $4,000-an-ounce threshold.