[Edaily Reporter Lim Yukyung ] Gold prices rose for the fourth consecutive trading day, hitting a seven-week high. Growing expectations for the reopening of the Strait of Hormuz drove down oil prices and caused the U.S. dollar and U.S. Treasury yields to weaken, pushing gold prices higher.

According to Bloomberg and Reuters on the 5th (local time), the spot price of gold rose by as much as 1.3% during the trading session, temporarily surpassing $4,300 per ounce. This marks the highest level since June 18. The previous day, it surged 4.1%, recording its largest daily gain since February 3.

The recent rise in gold prices was driven by optimism regarding the reopening of the Strait of Hormuz. Tony Chicamore, an analyst at IG Markets, said, “Gold prices surged as optimism spread that a diplomatic breakthrough in the Middle East was imminent,” adding, “This is clearly a positive factor for gold, as it maintains downward pressure on oil prices and reduces the need for central banks to raise interest rates.” He went on to predict, “If gold prices break through the 200-day moving average and hold above it, a stronger recovery toward $5,000 could materialize.”

Iran announced today that it had reached an agreement with Oman regarding new shipping routes through the Strait of Hormuz. Reuters reported, citing a senior Iranian source and two Middle Eastern officials, that the proposal currently under discussion between Iran and Oman includes provisions for Iran to control ships entering the Persian Gulf via the Strait of Hormuz.

Consequently, expectations grew that the Strait of Hormuz—through which 20% of the world’s crude oil shipments pass—would be partially reopened, and international oil prices fell.

In addition, President Donald Trump’s statement expressing a desire to reach an agreement with Iran had a positive impact on gold prices. President Trump said, “I would prefer to reach an agreement with Iran rather than end the conflict militarily.”

As expectations spread that the conflict between the U.S. and Iran, which has lasted for more than five months, may be entering a phase of resolution, the market is also revising its outlook on the Fed’s monetary tightening. The market is currently pricing in only one interest rate hike by the Fed by the end of this year. This marks a retreat from expectations of two hikes as recently as last week. Since precious metals like gold are non-interest-bearing assets, their investment appeal typically increases as the intensity of monetary tightening weakens.

Gold prices have fallen by nearly 20% since late February, when the conflict between the U.S. and Iran began. The sharp rise in energy prices caused by the conflict has increased inflationary pressures, and the resulting higher likelihood that the Fed will maintain high interest rates for a longer period is cited as the reason behind the weakness in gold prices.

In a report, TD Securities analysts, including Ryan McKay, noted, “As macroeconomic headwinds have receded somewhat and expectations for U.S.-Iran negotiations have grown, strong upward momentum has formed in the precious metals market.” They analyzed that “gold long positions held by funds employing macroeconomic investment strategies have more than doubled since June,” adding that “capital inflows from large investors on the Shanghai Futures Exchange and into Asian gold exchange-traded funds (ETFs) are also supporting the upward trend.” However, they predicted that “the still very tight energy market will pose a significant obstacle to gold prices continuing their bull run.”