Gold Hits One-Week High Amid Rising Geopolitical Tensions and Anticipated US Data Releases

"Support is coming from last week's better-than-expected US data which eased fears of a US recession,"  said IG markets analyst Tony Sycamore when commentating  on oil prices, noting that last week's US initial jobless claims saw the largest drop in about 11 months, although the 4-week moving average of the data rose to its highest level since September 2023.

"There is also a great deal of anxiety about when Iran might look to avenge Israel's assassination of key Hamas and Hezbollah leaders, Sycamore continued.

“Feels like a matter of when - not if."

“Geopolitical risks remain elevated, with Ukraine’s incursions into Russia putting at risk energy supply in Europe,” said Daniel Hynes, Senior Commodity Strategist at ANZ, in his latest note on commodity futures recovering from a sharp selloff last week.

European natural gas prices remained near their highest levels since December 2023 on Monday, driven by concerns over Russian pipeline flows. This came despite Russia’s Gazprom stating that it would send 39.6 million cubic meters of gas to Europe via Ukraine on Monday.

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President Volodymyr Zelensky confirmed on Saturday that for the first time the Ukrainian military forces are conducting a cross-border offensive inside Russia's western Kursk region. This marks the largest incursion into Russian territory since the war began in  February 2022, prompting Moscow to vow a strong response.

On Sunday, a fire erupted at the Zaporizhzhia nuclear power plant, Europe's largest, which is currently occupied by Russian forces. Both Moscow and Kyiv blamed each other for the incident, but both sides reported no signs of elevated radiation levels.

Back to the Middle East, the leaders of France, Germany, and Britain emphasized the urgent need for a ceasefire in Gaza, stating that "there can be no further delay" in a joint statement on Monday.  They warned Iran and its allies against escalating the conflict and endorsed a plan for talks proposed by the US, Qatar, and Egypt, which includes a new round of ceasefire discussions scheduled for August 15.

European stocks held steady on Monday, with the Stoxx Europe 600 index little changed. However, the index is down 3.6% for the month, largely due to Tokyo-led stock market crash last week on the back of weak US jobs numbers.

Japanese markets were closed on Monday for a holiday. US equity futures ticked up after all the major stock indexes rose to end the week on Friday but stopped just shy of a full recovery.

Meanwhile, gold priced in euros rose by 0.4% to one-week highs above €2235, while the UK gold price in pounds per ounce increased by 0.5% to £1914, the highest level since last Monday.

The price of silver, primarily an industrial metal  which  finds nearly 60% of its annual demand from industrial uses, climbed 1.4% to $27.85 per ounce, reducing last week's loss by more than one-third.

Betting on the next Federal Reserve decision in September now indicates a 100% chance that the US central bank will cut its policy rate from a 23-year high of 5.25–5.50% per annum, according to the FedWatch tool from CME Group, a derivatives exchange. Nearly 50% of bets are still for a half-point cut, though this is down from 85% a week ago, when global stock-market turmoil fuelled speculation that the Federal Reserve would need to cut rates earlier and more aggressively in response to the market crash .

Federal Reserve Governor Michelle Bowman, a voting member of the FOMC, slightly softened her usually hawkish tone on Saturday ahead of this week’s inflation data. She noted some 'welcome' progress on inflation over the last couple of months, although she acknowledged that inflation remains 'uncomfortably above' the central bank's 2% goal and is subject to upside risks.