Gold Jumps 1.6% as Easing Oil Prices Cool Inflation Fears; Fed Rate Hike Bets Loom Over Market

Gold prices rose more than 1% on Monday, extending a strong weekly rally, as softer crude oil prices eased inflation concerns and a weaker dollar made bullion more attractive to overseas buyers. But the gains faced a looming test from impending US inflation data and reinforced expectations that the Federal Reserve may raise interest rates next month.

Spot gold climbed 1.6% to $4,129.69 per ounce by 0220 GMT, while US gold futures for December delivery rose 1.6% to $4,139.00. The metal had gained about 5% last week .

Oil Retreat Drives the Rally

Oil prices fell after US President Donald Trump said he was highly unlikely to order further attacks on Iran as talks to end the conflict continued, easing concerns about potential supply disruptions in the Middle East. Brent crude slipped 64 cents, or 0.64%, to $97.67 per barrel, while West Texas Intermediate fell 35 cents, or 0.40%, to $90.51 .

Lower oil prices can ease inflationary pressures and reduce expectations that interest rates will stay higher for longer, lowering the opportunity cost of holding non-yielding bullion.

"Trump's more conciliatory tone toward Iran is helping keep a lid on oil prices, which in turn eases some of the inflation pressure that had been weighing on the metal along with a modest pullback in the dollar," said Tim Waterer, chief market analyst at KCM Trade.

The dollar softened, making greenback-priced bullion more affordable for buyers holding other currencies.

Strong Jobs Data Complicates the Picture

The rally unfolded against a surprisingly resilient US labour market. October nonfarm payrolls rose by 165,000, more than double the 59,000 expected by economists, while the unemployment rate dipped to 4.1% from 4.2% . The stronger-than-expected data reinforced expectations that the Federal Reserve remains on track for a December interest-rate increase.

Traders currently see a 79% chance that the Fed will raise rates in December, up from 71% prior to the payrolls data, according to CME's FedWatch tool. Several Fed officials have publicly advocated further tightening. San Francisco Fed President Mary Daly said she expected the central bank would "have to tighten policy further," while New York Fed President John Williams said inflation remained too high and the Fed must ensure it returns sustainably to the 2% target .

Higher interest rates generally weigh on gold because they increase the opportunity cost of holding the non-yielding asset.

Key Data Ahead

Market participants now await the US Consumer Price Index for October, due Tuesday, followed by the Producer Price Index on Friday. The CPI release is scheduled for 8:30 a.m. ET on November 10 .

"Any hot readings would likely firm the dollar and lift the odds of a December rate hike, which would quickly put gold back on the defensive," Waterer said.

Other Precious Metals

Among other metals, spot silver climbed 2.8% to $53.31 per ounce, platinum gained 1.6% to $1,556.14 and palladium rose 2.1% to $1,044.28 . Silver's gain outpaced gold, reflecting its dual role as both a safe-haven asset and an industrial metal with exposure to expectations for stronger economic activity.