Gold moved higher on Wednesday and remained close to the $4,400-an-ounce mark as investors prepared for U.S. inflation data that could shape expectations for Federal Reserve policy. Uncertainty surrounding the possible reopening of the Strait of Hormuz also continued to influence sentiment across commodity markets.
At 03:22 ET (07:22 GMT), XAU/USD advanced 0.7% to $4,400.02 an ounce. Gold Futures rose 0.4% to $4,459.30, while XAG/USD gained 1.8% to $65.88 an ounce and XPT/USD increased 0.7% to $1,755.16.
Middle East tensions keep gold supported
Bullion remained near its highest levels in two months as traders weighed conflicting signals over negotiations aimed at restoring shipping through the Strait of Hormuz.
Pakistan’s defense minister suggested that the U.S. and Iran were approaching an agreement, while separate reports pointed to progress in discussions between Oman and Tehran.
Iran, however, has continued to insist that Hormuz will remain shut until Washington satisfies its conditions, which include lifting restrictions on Iranian ports and compensating Tehran for damage from U.S. military action.
The uncertainty has kept oil and other energy markets volatile. Both the U.S. and the Iran-backed Houthis in Yemen reported attacks involving shipping around Hormuz and Bab el-Mandeb, while a U.S. Navy helicopter fired missiles at a Panama-flagged cargo ship attempting to move through the Gulf of Oman.
Separately, a refinery in Libya was hit by a drone attack.
The potential inflationary consequences of elevated energy prices remain particularly important for gold. If higher fuel costs keep inflation under pressure, the Fed could maintain restrictive interest rates for longer, reducing the relative appeal of assets such as bullion that do not generate income.
CPI and Chinese gold purchases could drive the next move
Markets are now waiting for Wednesday’s U.S. CPI report, with producer price data due a day later. Softer inflation could weaken the case for additional Fed tightening, while an upside surprise could put further rate increases back on the agenda.
Positioning has remained cautious ahead of the release, with swaps pricing roughly a 50% probability of a quarter-point rate increase in September.
Chinese demand is also providing support. The People’s Bank of China increased its gold reserves for the 21st straight month in July, purchasing roughly 640,000 troy ounces and lifting holdings to 76.08 million ounces. Continued buying of Chinese gold-backed ETFs has added to evidence of stronger institutional interest.
IG senior market analyst Tony Sycamore said the latest decline from $4,435 was linked to profit-taking before the CPI figures, more hawkish Fed rhetoric and renewed strength in energy prices.
According to Sycamore, gold faces downtrend resistance around $4,460, based on the late-January record high near $5,602. The 200-day moving average around $4,495 represents an additional hurdle.
A sustained move above both levels would be needed to strengthen the case for a recovery towards $5,000, he said.
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