Gold prices fell from a three-week high previously achieved in Tuesday's trading session, as fragile expectations of a peace agreement between the US and Iran caused the USD and oil prices to rise again, thereby affecting the US interest rate outlook ahead of important inflation data.
Spot gold prices fell 0.35% to $4,704.46/ounce after previously hitting their highest level in this morning's trading session since April 21. US gold futures for June delivery fell 0.5% to $4,706.10/ounce.
US President Donald Trump said that the ceasefire with Iran is currently only "very weak" after Tehran rejected the peace proposal from Washington and continued to maintain the demands that Mr. Trump called "unacceptable".
Mr. Ole Hansen - Head of Commodity Strategy at Saxo Bank said that the main reason for the weakening of gold is due to the rebound in energy prices, pulling US bond yields up before the release of US consumer price index (CPI) data.
The strengthening USD is also putting pressure on the gold market," Hansen said.
Oil prices are rising as the Hormuz Strait – the world's important energy transportation route – remains largely disrupted.
Investors are currently waiting for US inflation data to be released during the day to find more signals about the monetary policy orientation of the US Federal Reserve (Fed) in the near future.
According to analysts, high crude oil prices can increase inflationary pressure, thereby strengthening the ability for interest rates to remain high longer. Although gold is often seen as an inflation hedging tool, high interest rates are detrimental to this non-performing asset.
During the session, the yield of 10-year US Treasury bonds increased to its highest level in a week, while the USD increased by 0.4%, making USD-denominated commodities more expensive for investors holding other currencies.
According to CME Group's FedWatch tool, the market is currently almost no longer expecting the Fed to cut interest rates this year, and assesses the possibility of the Fed raising interest rates in March 2027 at around 36%.
The market is also following President Donald Trump's two-day visit to China starting from Wednesday, in which he is scheduled to meet Chinese President Xi Jinping. The Middle East issue is expected to be on the agenda of the meeting.
In general, gold prices are still fluctuating in the accumulation range, with a support zone formed before the 4,500 USD/ounce mark and a resistance zone around the 50-day moving average near the 4,757 USD/ounce level," Mr. Hansen said.
On other precious metals markets, spot silver prices fell 2.4% to 84.05 USD/ounce, platinum fell 3.1% to 2,006.15 USD/ounce, while palladium fell 1.6% to 1,484.23 USD/ounce.
