Gold prices recovered on Tuesday after falling to a two-week low in the previous session, as investors turned their attention to upcoming US inflation data while assessing the impact of rising geopolitical tensions and the Federal Reserve’s interest rate outlook.
Spot gold rose 0.6% to US$4,023.77 per ounce by 0747 GMT, after earlier touching its lowest level since July 1 at US$3,983.29. US gold futures for August delivery also gained 0.6% to US$4,030.30 per ounce.
The recovery came after gold suffered its steepest daily decline in more than a month on Monday, falling about 3% as escalating US-Iran tensions pushed oil prices to a one-month high.
While gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, higher interest rates tend to weigh on the non-yielding asset by increasing the appeal of interest-bearing investments.
“You have a situation where the markets probably don’t want to commit. They have a big batch of event risks in front of them. There’s, of course, the Warsh testimony and then the CPI print, so there’s a lot for people to look at in addition to the headlines out of the Middle East,” said Ilya Spivak, head of global macro at Tastylive.
Investors are closely monitoring the June US Consumer Price Index (CPI) data for further clues on inflation trends and the Federal Reserve’s monetary policy direction. Traders have increased expectations of a September US interest rate hike, with CME Group’s FedWatch Tool showing the probability rising to around 76% from 57% a week earlier.
RHB Investment Bank Bhd (RHB Research) maintained a bearish outlook on gold following Monday’s sharp decline, noting that COMEX Gold retreated US$108 to close at US$4,005.70 after hitting a session high of US$4,111.60.
The research house said the precious metal is now testing the key psychological support level of US$4,000, with the latest negative price action indicating continued weak market sentiment and strong bearish momentum.
“Since the bearish technical setup remains intact, the commodity may stage a fresh attempt to close below the US$4,000 mark,” RHB Research said.
A break below the US$4,000 support could open the way for further correction towards US$3,700, while immediate resistance is expected at US$4,200 followed by US$4,400.
RHB Research maintained its short position on COMEX Gold, initiated at US$4,605.70 on March 19, with a stop-loss threshold set at US$4,400.
Elsewhere in the precious metals market, spot silver gained 0.6% to US$57.99 per ounce after also touching a two-week low earlier in the session. Platinum slipped 0.3% to US$1,600.24 while palladium rose 1.9% to US$1,269.98.
