Gold prices (XAU/USD) strengthened, climbing back above US$4,020 per troy ounce during early European trading on Monday (November 9). This recovery was driven by a weaker US dollar and growing optimism regarding a diplomatic path to resolve the conflict between the United States and Iran.
US President Donald Trump is scheduled to meet with the Prime Minister of Qatar at the White House on Monday to discuss the possibility of a new ceasefire and the resumption of talks with Iran. Qatar has long played a crucial role as a mediator between Washington and Tehran.
Market sentiment toward gold has also been bolstered by expectations that the Democratic Party may push back on the US-Iran conflict. The Democrats, who control both the US House of Representatives and the Senate, have opposed Trump’s proposed US$1.5 trillion defense budget, with indications that they are only willing to approve a figure closer to US$1 trillion.
Nevertheless, the upside for gold remains constrained by US labor market data that came in stronger than anticipated. Nonfarm payrolls surged by 165,000 in October—well above the expected 65,000—while the unemployment rate dipped to 4.1% from 4.2%.
These figures have reinforced expectations that the Federal Reserve may maintain a restrictive monetary policy for longer. The market now assigns a 79.6% probability to a Federal Reserve interest rate hike in December, up from 72.8% prior to the release of the labor report.
Higher interest rates increase the opportunity cost of holding gold, an asset that yields no return. Consequently, the future direction of gold prices will be heavily influenced by developments in US-Iran diplomacy, movements in the US dollar, and shifts in expectations regarding Federal Reserve policy. (srh)