Gold held gains as concerns regarding inflation eased with oil prices on hopes for a diplomatic resolution to the West Asia war.
Bullion was near $4,130 an ounce after it rose 1.7% on Monday and 5% in the prior week.
The rise was supported by Brent declining to around $92 a barrel as expectations grew for a breakthrough in the Iran-US peace negotiations post last week’s midterm elections seeing a sweeping victory for the Democrats.
Gold and oil moved have mostly moved in opposite directions this year with elevated energy prices fueling inflation and tighter monetary policy, a headwind for the non-yielding metal.
Demand was also boosted by a drop in the US dollar, which made the commodity priced in the greenback cheaper for buyers using other currencies.
Still, headwinds on gold remain, with Federal Reserve officials expressing the need to tame inflation and traders pricing in a high likelihood for an interest rate hike in December. Tom Barkin, President of the Richmond Fed and Austan Goolsbee, President of the Chicago Fed both pointed to a strong economy and inflationary pressures in remarks on Monday.
While the consensus for the precious metal is “moderately bullish to sideways” heading into the year-end, gold is still lacking a clear narrative, Nicky Shiels, head of metals strategy at MKS PAMP SA wrote in a note. “Conviction is low as major allocators sit on the sidelines until January,” leaving short-term moves to be determined by trend-following trades and physical demand.
Spot gold was 0.3% lower at $4,127.80 an ounce as of 8:27 a.m. Singapore time. Silver fell 0.3% to $53.3, after rising nearly 3% in the earlier session. Platinum and palladium edged lower. The Bloomberg Dollar Spot Index was marginally higher after dropping 0.5% on Monday.
With inputs from Bloomberg