Gold prices edged higher on Tuesday after falling to a two-week low, with bargain hunters returning to the market ahead of a series of key US economic events that could shape the outlook for interest rates.
Investors remain focused on June’s inflation report and Federal Reserve Chair Kevin Warsh’s congressional testimony, while ongoing tensions in the Middle East continue to support demand for traditional safe-haven assets.
Spot gold (XAU/USD) climbed 0.5% to $4,021.87 an ounce by 09:58 GMT, while Gold Futures rose 0.55% to $4,027.22. Silver (XAG/USD) gained 0.78% and platinum (XPT/USD) added 0.34%.
Rising Energy Prices Keep Inflation Risks Alive
Gold regained ground after Monday’s nearly 3% decline, its steepest one-day loss in more than a month, during which prices briefly slipped below $4,000 an ounce.
The rebound came as markets continued to assess developments in the Middle East. President Donald Trump reinstated a blockade targeting Iranian shipping and described the United States as the “Guardian of the Hormuz Strait,” while proposing a 20% charge on cargo passing through the strategic shipping route.
The renewed geopolitical tensions have lifted crude oil prices, raising concerns that higher energy costs could keep inflation elevated and complicate the Federal Reserve’s path toward price stability.
For precious metals, this creates opposing forces. Inflation often increases demand for gold as a defensive asset, but expectations of tighter monetary policy typically strengthen the US dollar and bond yields, reducing bullion’s relative appeal.
Markets Reprice Interest Rate Expectations
Additional pressure came after Federal Reserve Governor Christopher Waller suggested policymakers may need to raise interest rates if inflation remains stubbornly high.
According to ANZ, escalating geopolitical tensions have increased the risk of persistently higher energy prices, leading markets to assign a 43% probability of a rate hike at the Fed’s July 28-29 meeting.
Higher interest rates generally weigh on gold by increasing the opportunity cost of holding non-yielding assets while supporting the dollar.
Attention now turns to June’s Consumer Price Index report and Kevin Warsh’s congressional appearance, both of which are expected to provide fresh insight into the Federal Reserve’s next policy moves.
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