Gold remained close to its highest level in more than two months on Tuesday as buying momentum continued despite a firmer dollar, rising Treasury yields and stronger energy prices.
At 00:56 ET (04:56 GMT), XAU/USD rose 0.4% to $4,407.79 an ounce, while gold futures climbed 1.1% to $4,467.59. XAG/USD declined 0.5% to $65.41 an ounce, while XPT/USD increased 0.2% to $1,761.10.
U.S. inflation becomes the next test for gold
Bullion’s advance gained momentum on Friday, when it jumped 2.4% following an unexpected contraction in U.S. nonfarm payrolls for July. Gold extended that strength on Monday, closing around $4,390 after gaining 1.11%, its highest daily finish in almost 10 weeks.
The move has come despite several market forces that would normally work against the precious metal. The U.S. dollar, Treasury yields and energy prices have all strengthened, yet gold has continued to attract buyers.
Tony Sycamore, senior market analyst at IG, pointed to several possible drivers, including buying from investors who missed the earlier decline towards $4,000, speculative short-covering and renewed demand for safe-haven assets.
The next major test comes from U.S. inflation figures, with the consumer price index scheduled for Wednesday followed by producer prices on Thursday.
Markets currently assign a 52% probability to a September interest-rate increase and an 81% chance of a December hike, according to CME FedWatch.
That outlook matters for bullion because higher interest rates typically make non-yielding assets such as gold relatively less attractive.
Hormuz dispute keeps geopolitical risk elevated
Uncertainty surrounding the Strait of Hormuz is providing another source of support for safe-haven demand.
Iran said it was nearing a final agreement with Oman over new shipping lanes through the strategically important waterway, although Tehran maintained that Washington must meet further conditions before traffic can resume.
Prospects for a breakthrough have been complicated by stalled U.S.-Iran negotiations and President Donald Trump’s demand for compensation from Iran.
The resulting uncertainty has helped push oil prices higher again, increasing concerns that elevated energy costs could feed through to inflation. Persistent energy-driven price pressures could make it more difficult for the Federal Reserve to consider easing monetary policy.
China’s gold purchases strengthen underlying demand
Chinese demand is also contributing to the supportive backdrop for bullion.
The People’s Bank of China increased its gold holdings in July by the largest amount since October 2023, pointing to continued demand from the official sector.
The U.S. Dollar Index, meanwhile, was little changed near 99.8 after strengthening alongside crude prices.
Sycamore said gold’s rebound from its June low of $3,942 has brought an important technical resistance area back into view.
Downtrend resistance sits around $4,460, while the 200-day moving average provides another potential barrier near $4,495.
The $4,460 to $4,500 range could initially restrict the rally, according to Sycamore. A sustained move through that zone, however, could provide scope for a broader recovery towards $5,000.
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