Gold prices edged higher on Tuesday as investors balanced renewed tensions in the Middle East with uncertainty over the direction of U.S. interest rates.
Gold rose 0.63% to $4,027.15 per ounce, recovering some losses from the previous session as markets assessed the impact of fresh U.S.-Iran tensions and rising oil prices on the global economic outlook.
The move came after President Donald Trump announced plans to reinstate a blockade on Iranian vessels passing through the Strait of Hormuz and seek reimbursement from countries benefiting from U.S. efforts to secure the strategic shipping route.
The announcement pushed oil prices sharply higher and renewed concerns that rising energy costs could fuel inflation, potentially influencing the Federal Reserve’s interest-rate decisions.
Gold typically benefits from periods of geopolitical uncertainty as investors seek safer assets. However, expectations of higher interest rates can limit gains because gold does not generate interest income and becomes less attractive compared with interest-bearing investments.
Investors are now awaiting key U.S. inflation data and Federal Reserve Chair Kevin Warsh’s testimony before Congress for further clues on the central bank’s policy outlook.
Markets currently price in about a 51% chance of a Federal Reserve rate hike in September, compared with a 23% probability that policymakers will leave rates unchanged.
Despite Tuesday’s recovery, gold has fallen 6.56% over the past month as shifting expectations around monetary policy continue to influence prices. The precious metal, however, remains 21.11% higher than a year ago, showing its strong performance over the longer term.
