Gold prices extended their advance on Wednesday, trading close to $4,400 an ounce as investors awaited fresh U.S. inflation figures for further guidance on the Federal Reserve’s interest-rate outlook. Markets were also closely watching developments around efforts to reopen the Strait of Hormuz.
At 03:22 ET (07:22 GMT), XAU/USD was up 0.7% at $4,400.02 an ounce, while Gold Futures gained 0.4% to $4,459.30. XAG/USD climbed 1.8% to $65.88 an ounce, while XPT/USD advanced 0.7% to $1,755.16.
Hormuz uncertainty supports gold as rate outlook stays in focus
Gold remained close to a two-month high as investors continued to assess the likelihood of an agreement to reopen the Strait of Hormuz.
Pakistan’s defense minister indicated that Washington and Tehran were nearing an arrangement, while reports of advanced talks between Oman and Iran suggested diplomatic efforts were continuing.
Iran has nevertheless maintained that the waterway will stay closed until the U.S. meets a series of demands, including ending the blockade of Iranian ports and providing compensation for damage caused by U.S. military strikes.
The conflicting signals have contributed to continued volatility in energy markets. The U.S. and Yemen’s Iran-aligned Houthis separately reported attacks involving shipping around the Strait of Hormuz and Bab el-Mandeb, while a U.S. Navy helicopter fired missiles at a Panama-flagged cargo vessel attempting to cross the Gulf of Oman.
A drone attack also targeted a refinery in Libya.
For gold investors, the impact of higher energy costs on inflation remains a key consideration. Persistently elevated energy prices could encourage the Federal Reserve to keep interest rates higher for longer, increasing the opportunity cost of holding non-yielding bullion.
U.S. CPI, Chinese demand and technical levels in focus
Attention now turns to Wednesday’s U.S. consumer price index, followed by producer price figures on Thursday. A weaker inflation reading could reduce pressure on the Fed to tighten monetary policy, while stronger-than-expected data could revive expectations for another rate increase.
Investors have largely avoided taking aggressive positions before the CPI release, with swaps indicating roughly even odds of a quarter-point rate increase in September.
Meanwhile, the People’s Bank of China raised its gold reserves for a 21st consecutive month in July, adding around 640,000 troy ounces to bring total holdings to 76.08 million ounces. Chinese gold-backed ETFs have also continued to attract inflows, reinforcing signs of stronger institutional demand.
Tony Sycamore, senior market analyst at IG, said gold’s recent pullback from $4,435 reflected profit-taking ahead of the CPI release, hawkish Federal Reserve commentary and renewed strength in energy markets.
Sycamore said gold is now approaching downtrend resistance near $4,460, based on the late-January record high of around $5,602, while the 200-day moving average near $4,495 adds another technical barrier.
He said bullion would need to break and hold above both levels to create scope for a stronger recovery towards $5,000.