Gold Rebounds From Two-Week Low Ahead of US CPI Data and Fed Chair Warsh’s Congressional Testimony
Gold prices rebounded on Tuesday after falling to their lowest level in two weeks, supported by bargain hunting following the previous session's sharp sell-off. Investors are now turning their attention to the upcoming US Consumer Price Index (CPI) report and Federal Reserve Chair Kevin Warsh's testimony before Congress for fresh clues on the future path of US interest rates.
Persistent geopolitical tensions in the Middle East and growing expectations that the Federal Reserve could maintain higher interest rates for longer continued to shape market sentiment. Hawkish remarks from Federal Reserve Governor Christopher Waller further reinforced concerns that inflation may remain elevated, limiting the upside for precious metals.
Gold Prices Recover as Investors Await Key US Economic Events
As of 16:58 WIB, spot gold (XAU/USD) climbed 0.54% to $4,022.87 per ounce, while Gold Futures gained 0.59% to $4,029.22. Meanwhile, silver (XAG/USD) rose 0.63% to $58.02 per ounce, and platinum (XPT/USD) advanced 0.42% to $1,610.82 per ounce.
Middle East Tensions Keep Inflation Risks in Focus
Gold recovered after plunging nearly 3% on Monday, marking its steepest one-day decline in more than a month. During the sell-off, bullion briefly slipped below the psychologically important $4,000 per ounce level for the first time in three weeks.
The latest wave of selling coincided with escalating geopolitical tensions in the Middle East. US President Donald Trump announced that the United States would reinstate restrictions on Iranian shipping through the Gulf and declared Washington the "Guardian of the Strait of Hormuz," proposing a 20% transit fee on cargo passing through the strategic waterway.
The announcement significantly intensified US pressure on Tehran while raising doubts about the durability of the fragile ceasefire reached in June.
Crude oil prices extended their recent rally as traders assessed the renewed risk of supply disruptions through the Strait of Hormuz. Higher energy prices have revived concerns that inflation could remain stubbornly high, making it more difficult for the Federal Reserve to bring price growth back to its long-term target.
For gold, rising inflation presents a mixed outlook. While persistent inflation enhances gold's appeal as a traditional safe-haven and store of value, it can also strengthen expectations for tighter monetary policy. Higher interest rates typically boost US Treasury yields and the US dollar, reducing the attractiveness of non-yielding assets such as gold.
Waller's Hawkish Remarks Boost July Rate Hike Expectations
Adding to pressure on bullion, Federal Reserve Governor Christopher Waller stated that policymakers may need to raise interest rates in the near term if core inflation continues to show broad-based price pressures.
Analysts at ANZ noted that the latest escalation in the Middle East has reinforced expectations that higher energy costs could keep inflation elevated, increasing the likelihood of tighter monetary policy. According to the brokerage, financial markets are currently pricing in a 43% probability of a Federal Reserve rate hike at its July 28–29 policy meeting.
Higher borrowing costs generally reduce the appeal of gold because the precious metal does not generate interest income. Rising rates also tend to support both US Treasury yields and the US dollar, creating additional headwinds for bullion prices.
Investors are now awaiting the release of the June US Consumer Price Index (CPI) and Federal Reserve Chair Kevin Warsh's congressional testimony later on Tuesday. Both events are expected to provide critical insights into the Fed's policy outlook and could drive the next major move in gold prices.