Gold Prices Edge Higher After 4% Plunge as US Data Takes Center Stage
Gold prices edged higher on Tuesday but remained close to a seven-week low as the standoff between the United States and Iran over the Strait of Hormuz kept energy prices elevated and strengthened expectations for further Federal Reserve interest rate hikes.
At 17:33, spot gold rose 0.6% to $4,139.91 per troy ounce, while gold futures gained 0.1% to $4,171.90 per troy ounce.
Oil prices continued to rise as Iran maintained its conditions for reopening the Strait of Hormuz. Concerns are growing that persistently high oil prices could fuel inflation and encourage central banks to maintain or extend their monetary tightening cycles. This could, in turn, reduce the appeal of non-yielding assets such as gold.
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Iranian officials have reportedly expressed pessimism over the possibility of reaching an agreement with Washington to end hostilities before the US midterm elections in November. The development came after President Donald Trump rejected Tehran's latest proposal to reopen the strategic waterway within seven days.
The US-Iran conflict has now entered its eighth month, continuing to disrupt global energy flows and fuel concerns over inflation.
The renewed rise in oil prices also exacerbated the sell-off in US Treasury bonds on Monday, further weighing on gold. The 10-year US Treasury yield climbed to its highest level in 19 years, increasing the opportunity cost of holding gold, which does not pay interest. Gold prices plunged 4% on Monday.
Over the past month, gold has fallen around 7%. The decline has come amid the Fed's first interest rate hike since 2023, while policymakers have continued to leave the door open to additional increases. Markets are now pricing in roughly a 70% probability of another rate hike in October.
ANZ analysts said the short-term macroeconomic backdrop remains challenging for gold, as higher yields and persistent inflation risks continue to weigh on the precious metal.
Markets will next turn their attention to the Personal Consumption Expenditures (PCE) inflation report due Wednesday, the Fed's preferred inflation gauge, followed by the nonfarm payrolls report on Friday. Both releases could provide fresh clues about the Federal Reserve's interest rate path.