Gold prices rose during Tuesday's trading session after hitting their lowest level in two weeks earlier, as investors awaited the release of US inflation data that could determine the Federal Reserve's monetary policy path in the coming period.
This recovery came after a strong sell-off in the precious metal in the previous session, while military tensions between the United States and Iran continued to support oil prices, which reinforced fears of continued inflationary pressures and prompted markets to increase their bets on a rise in US interest rates.
The price of gold in spot trading rose 0.6% to $4,023.77 an ounce by 07:47 GMT, after earlier in the session touching $3,983.29, its lowest level since July 1.
US gold futures for August delivery also rose 0.6% to $4,030.30 an ounce.
Recovery after biggest daily loss in over a month
The current rise came after gold suffered losses of about 3% during Monday's session, recording its biggest daily percentage drop in more than a month, following continued military confrontations between the United States and Iran, which pushed oil prices to their highest levels in a month.
Although gold is traditionally seen as one of the most important tools for hedging against inflation, rising interest rates reduce its appeal because it is a non-yielding asset, while interest-bearing assets become more attractive to investors.
Ilya Spivak, head of global macroeconomics at Tastylive, said that markets do not appear ready to take large investment positions at the moment, given the large number of important events that await them in the coming days.
He added that investors are awaiting Federal Reserve Chairman Kevin Warsh’s testimony before Congress, along with the release of consumer price index data, as well as continued developments in the Middle East, all of which could strongly influence the direction of the markets.
Inflation data, certification, and workshops under scrutiny
Investors are awaiting the release of the US Consumer Price Index (CPI) data for June later on Tuesday, looking for fresh clues about the path of inflation and the Federal Reserve's monetary policy.
Market participants are also awaiting the release of the Producer Price Index (PPI) data this week, along with Federal Reserve Chairman Kevin Warsh's first semi-annual testimony before Congress, which may provide a clearer view of the central bank's direction in the coming period.
In this context, Federal Reserve Governor Christopher Waller said on Monday that the central bank may have to raise interest rates in the near future if upcoming data show inflation continues at levels well above the 2% target.
Market bets on an interest rate hike continue to rise
Markets continued to strengthen their expectations regarding the tightening of monetary policy, as the US interest rate monitoring tool available on Investing Saudi Arabia showed the probability of a US interest rate hike during the September meeting rising to about 76%, compared to about 57% just a week earlier.
This shift in investor expectations reflects a growing conviction that persistent inflationary pressures, driven by rising energy prices and geopolitical tensions, may prompt the Federal Reserve to continue tightening monetary policy rather than halting interest rate hikes.
Performance of other precious metals
As for other precious metals, silver prices rose in spot trading by 0.6% to $57.99 an ounce, after hitting a two-week low earlier in the session.
In contrast, platinum fell 0.3% to $1,600.24 an ounce, while palladium rose 1.9% to $1,269.98 an ounce.
