Gold prices rose during trading on Tuesday, supported by a decline in oil prices following a fragile truce between Israel and Iran, while investors continue to monitor inflation risks and the possibility of a US interest rate hike in the coming period.
Middle East truce puts pressure on oil and supports gold
Tim Waterer, chief market analyst at KCM Trade, said that the relative easing of tensions between Israel and Iran has helped to calm oil prices somewhat, which has had a positive impact on gold's performance.
Iran and Israel announced on Monday a halt to their mutual attacks in response to a call from US President Donald Trump, but Tehran warned at the same time that it would resume military operations if Israel continued to target Hezbollah in Lebanon.
Following these developments, oil prices declined, giving up most of the strong gains they had made during Monday's session.
Interest rates and inflation remain the deciding factors.
Oil is a major driver of inflation concerns, as its continued price increases typically lead to higher inflationary pressures. While gold is traditionally seen as a hedge against inflation, rising interest rates are a negative factor for the non-yielding precious metal.
In this context, Goldman Sachs predicted that the US Federal Reserve would keep interest rates unchanged until 2026, postponing any potential rate cut to 2027, based on the continued strength of economic activity and the improvement in US labor market conditions.
All eyes are on US inflation data.
Investors are awaiting the release of the US Consumer Price Index (CPI) data for May on Wednesday, as it is one of the most important indicators that will help determine the future course of US monetary policy.
Waterer believes that gold returning to the $5,500 per ounce level before the end of the year is still possible, but achieving this scenario requires a set of supporting factors to be present at the same time, including a decline in oil prices, a decrease in US bond yields, a weak dollar, and continued strong demand from central banks around the world.
Gold now
Gold rose 0.4% in spot trading to $4,345.71 an ounce, after hitting its lowest level in more than two months in the previous session.
US gold futures for August delivery also rose 0.2% to $4,370.80 an ounce.
Performance of other precious metals
Spot silver rose 0.4% to $68.45 an ounce.
Platinum also rose by 0.3% to $1,759.74 an ounce.
In contrast, palladium made the strongest gains among the major metals, rising 1.5% to $1,223.44 an ounce.
