Easing inflation concerns support bullion
Gold prices advanced on Tuesday, remaining comfortably above the key $4,000-an-ounce threshold as markets evaluated renewed diplomatic efforts between the United States and Iran and their potential impact on energy prices, inflation and Federal Reserve policy.
At 01:24 ET (05:24 GMT), spot gold (XAU/USD) climbed 1% to $4,049.47 an ounce, while Gold Futures also rose 1% to $4,054.35. Silver (XAG/USD) gained 2.6% to $57.87 an ounce and platinum (XPT/USD) added nearly 1% to $1,611.09.
Diplomatic efforts reshape market sentiment
Bullion extended its recovery after rebounding from last week’s decline, with investors weighing persistent geopolitical uncertainty against signs that Washington and Tehran may be moving back toward negotiations.
Crude prices eased after two consecutive sessions of gains as reports of diplomatic mediation offset continued military exchanges and fresh warnings from Yemen’s Iran-backed Houthi movement, which threatened a naval blockade targeting Saudi Arabia.
The announcement came even as indications emerged that the United States and Iran are attempting to revive diplomatic contacts aimed at halting the escalating conflict. A senior Iranian official also told Reuters that mediators have proposed a 10-day ceasefire designed to preserve last month’s interim agreement and create an opportunity for broader negotiations.
The latest escalation had previously pushed oil prices to their highest levels in more than a month, increasing concerns that rising energy costs could reignite inflation and reinforce expectations for tighter US monetary policy.
Federal Reserve meeting remains in focus
Investors are now looking ahead to next week’s Federal Reserve meeting, where policymakers are widely expected to leave interest rates unchanged while providing updated guidance on inflation and the economic outlook.
Markets currently assign a 64% probability to a September interest rate increase.
Afdhal Rahman, Executive Director, Wealth Advisory at OCBC, said gold’s strong rally has run into a more challenging macro backdrop as higher real yields, a stronger U.S. dollar and hawkish repricing of interest-rate expectations have weighed on investor demand.
He added that renewed tensions in the Gulf could keep oil prices, inflation expectations and the U.S. dollar volatile in the near term, leaving gold under pressure until expectations for tighter monetary policy begin to ease, although sustained central bank buying should continue to provide longer-term support for bullion.
Gold stabilises after sharp quarterly decline
Despite Tuesday’s gains, gold has traded within a relatively narrow range around the $4,000-an-ounce level in recent weeks following a 14% decline during the second quarter, its weakest quarterly performance since 2013.