Holding firm above $4,100! Oil price plunge eases inflation concerns, gold extends post-election rally, but the shadow of rate hikes still lingers.

Gold prices closed higher on Monday, holding firm above $4,100 per ounce, as falling oil prices eased inflation concerns and dragged the dollar lower, while investors increasingly expect a Democratic-controlled Congress to push for an end to the Middle East war. Data showed that spot gold rose nearly 2% at the close of U.S. trading on Monday, while U.S. gold futures for December delivery rose 1% to settle at $4,114.50. In early Asian trading on Tuesday, as of press time, spot gold edged lower to $4,127.46. On Monday, oil prices extended their biggest weekly decline since April 2020, as traders weighed diplomatic efforts to end the U.S.-Iran war against a fresh wave of attacks in the region. Earlier, U.S. President Trump played down the possibility of striking Iran again, although sporadic attacks on ships near the Strait of Hormuz continued. Meanwhile, U.S. stocks rose as buyers stepped in after last week's selloff in tech shares. The dollar index fell, making dollar-denominated commodities cheaper for buyers using other currencies. So far this year, oil and gold have mostly moved in opposite directions, with high energy prices intensifying expectations of tighter monetary policy a headwind for non-yielding gold. U.S. Treasury yields and crude oil prices have fallen in recent sessions as the market bets that Democrats, after taking control of Congress, will push to end the Iran conflict, with less support from expanded government spending and borrowing. Phil Flynn of Price Futures Group wrote that oil was the "main DRIVE" behind the day's gold rally. "Falling oil prices have eased near-term inflation pressure, which is good for gold, even if the longer-term rate path remains restrictive," he added, noting that if gold can hold its recent lows, the path of least resistance is still likely to be upward. However, stronger-than-expected U.S. nonfarm payrolls data released last Friday triggered concerns about further Federal Reserve rate hikes, weighing on demand for the non-yielding asset. Traders will focus on monthly consumer price index data due Tuesday and producer price data due Friday for the next clue on the rate path. Chicago Fed President Austan Goolsbee said policymakers need to address the potential economic overheating and broadening inflation pressures from the artificial intelligence (AI) buildout. "We have to recognize that on the policy target of inflation, we are not yet where we need to be on the cost side and the inflation side," Goolsbee said Monday at an event in Chicago. Mitsubishi UFJ analyst Soojin Kim said in a report: "Despite the U.S. employment report released over the weekend showing November data far exceeding expectations, gold still managed to rise. The pullback in energy prices last week helped calm the market's inflation anxiety and also means the pace of rate hikes by global central banks may slow." According to the CME FedWatch tool, traders currently price the probability of a Fed rate hike in December at as high as 84%. Separately, data released last Saturday showed that the People's Bank of China increased its gold reserves in October, extending its buying streak to two years. The World Gold Council reported that cumulative net official-sector purchases in the third quarter totaled 321 tonnes, the highest level since late 2024, with 25.8 tonnes added to gold reserves in October, the largest monthly purchase in three years.