Market sentiment remains broadly constructive, although momentum has moderated after the strong risk rally seen earlier this week. Investors continue to focus on developments surrounding the Strait of Hormuz after Iran confirmed it had reached an agreement with Oman on a proposed shipping route. However, officials stressed that the arrangement would be temporary, lasting between two and four months, and would not represent a full reopening of the Strait. Iran also reiterated that any lasting agreement remains dependent on changes in US policy, suggesting geopolitical risks have eased but not disappeared.

Oil prices have stabilised after their sharp decline earlier this week. Brent crude edged up 0.11% to $79.45/bbl, while WTI slipped 0.73% to $75.22/bbl. European natural gas prices continued to fall sharply, extending weekly losses to more than 13%, reflecting improving expectations for energy supply.

Fixed income markets were relatively quiet. The 2-year Treasury yield eased to 4.18%, while the 10-year yield held steady at 4.61% after the US Treasury announced quarterly refunding plans broadly in line with expectations. Markets also slightly reduced expectations for a September Federal Reserve rate cut, with implied odds falling from 58% to 54%.

US equity markets paused after reaching record highs. The S&P 500 slipped 0.17%, while the Nasdaq fell 0.83% as investors took profits in technology stocks. Semiconductor shares also consolidated after recent gains, with AMD weighing on the sector following disappointing guidance. Nevertheless, the broader AI investment theme remains intact, with Nvidia continuing to outperform after positive commentary surrounding its next-generation Rubin platform and confirmation that SpaceX plans to use Nvidia AI chips.

Attention now turns to a busy economic calendar, including US initial jobless claims, Q2 productivity and unit labour costs, Eurozone retail sales, Germany factory orders, UK construction PMI and the ECB's latest Economic Bulletin. These releases could influence expectations for the timing of future central bank rate cuts.

Gold Outlook
Gold delivered a strong rebound, rising 4.19% in its largest one-day gain since February despite markets reducing expectations for a September Fed rate cut. The move suggests investors continue to view gold as an attractive portfolio hedge amid lingering geopolitical uncertainty and a weaker US dollar, which has now declined for three consecutive sessions.

For today's session, gold is likely to remain supported above the $4,177/oz level while the dollar stays under pressure. However, upside momentum may become more dependent on today's US labour market and productivity data. Softer-than-expected economic figures would reinforce expectations of policy easing later this year and could extend gold's rally towards recent highs. Conversely, stronger data may lift Treasury yields and the US dollar, prompting some profit-taking after yesterday's sharp advance.

Conclusion: Gold retains a constructive near-term outlook. While easing Middle East tensions have reduced safe-haven demand, declining real yields, a softer dollar and continued macro uncertainty should continue to provide underlying support. Today's US data will be the key catalyst for determining whether gold can extend gains or consolidate after its strongest daily rally in six months.

Key Support and Resistance Levels

Resistance Level 1: 4,380

Resistance Level 2: 4,431

Resistance Level 3: 4,500

Support Level 1: 4,177

Support Level 2: 4,110

Support Level 3: 4,034

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