Gold prices recovered some ground on Tuesday after briefly trading at their lowest levels in two weeks, with bargain hunting emerging after the previous session’s sharp selloff as investors awaited U.S. inflation data and Federal Reserve Chair Kevin Warsh’s congressional testimony.

Persistent tensions in the Middle East and expectations that the Federal Reserve could keep interest rates elevated also remained in focus after hawkish remarks from Fed Governor Christopher Waller.

At 05:58 ET (09:58 GMT), XAU/USD rose 0.5% to $4,021.87 an ounce, while Gold Futures gained 0.55% to $4,027.22. XAG/USD advanced 0.78% to $58.10 an ounce, while XPT/USD added 0.34% to $1,609.82.

Middle East tensions keep inflation concerns in focus

Gold recovered after tumbling nearly 3% on Monday, its steepest one-day decline in more than a month, with the metal briefly falling below the $4,000-an-ounce mark for the first time in three weeks.

The latest bout of selling came as the conflict in the Middle East intensified. President Donald Trump said the United States would reinstate its blockade of Iranian shipping in the Gulf and declared Washington the "Guardian of the Hormuz Strait," proposing a 20% fee on cargoes transiting the strategic waterway. The move marked a sharp escalation in U.S. pressure on Tehran and raised doubts over the durability of the fragile truce reached in June.

Crude prices extended recent gains as investors assessed the risk of renewed supply disruptions through the strategic waterway, reviving concerns that higher energy costs could fuel inflation and complicate the Federal Reserve’s efforts to return price growth to its target.

For bullion, the inflation outlook presents a double-edged sword. Rising energy costs can enhance gold’s appeal as a store of value, but if they also strengthen expectations for tighter monetary policy, the resulting increase in bond yields and the dollar can outweigh that support.

Waller comments boost July rate hike expectations

Further weighing on bullion, Federal Reserve Governor Christopher Waller said policymakers may need to raise interest rates in the near term if underlying inflation continues to point to broad-based price pressures.

ANZ analysts said the latest escalation in the Middle East had reinforced expectations that higher energy prices could keep inflation elevated, increasing the likelihood of tighter monetary policy. The brokerage noted markets are now pricing in a 43% probability of a rate hike at the Fed’s July 28-29 policy meeting.

Higher borrowing costs typically reduce the appeal of non-yielding assets such as gold by increasing the opportunity cost of holding bullion, while also lending support to Treasury yields and the U.S. dollar.

Investors are now awaiting June U.S. consumer price data and Federal Reserve Chair Kevin Warsh’s congressional testimony later Tuesday, with both events expected to help shape expectations for the Fed’s interest rate trajectory. 

Gold prices extended losses on Monday after renewed U.S. and Iranian strikes over the weekend lifted oil prices and reinforced concerns that a fresh inflation shock could keep the Federal Reserve on a hawkish path, weighing on the appeal of non-yielding bullion.

At 01:05 ET (05:05 GMT), XAU/USD fell 1.54% to $4,057.76 an ounce, while Gold Futures slipped 1.17% to $4,065.45 an ounce. XAG/USD fell 2.80% to $58.19 an ounce, while XPT/USD declined 1.61% to $1,604.60.

The conflict in the Middle East intensified over the weekend after the U.S. carried out another round of strikes on Iranian targets following an attack on a Cyprus-flagged cargo vessel in the Strait of Hormuz. Although Tehran said the key shipping route would remain closed until further notice, U.S. officials disputed the claim, highlighting the fragile state of ceasefire negotiations.

Rising oil prices revive inflation concerns

Oil prices remained more than 3% higher after paring an earlier rally of nearly 5%, as traders continued to price in the risk of supply disruptions through the Strait of Hormuz despite hopes the conflict will remain contained.

The prospect of sustained energy price gains has revived fears of another inflation shock, reinforcing expectations that the Federal Reserve may have to keep interest rates elevated for longer. Higher yields and a firmer dollar tend to reduce the appeal of non-interest-bearing assets such as gold.

Minutes from the Fed’s June meeting released last week already showed several policymakers believed there was a case for raising interest rates, while officials broadly expressed greater concern over inflation pressures even as worries about the labor market eased. The next Federal Reserve meeting is slated for July 28-29. 

CPI, Fed testimony key for gold outlook

Investors are now awaiting Tuesday’s U.S. consumer price index report and Federal Reserve Chair Kevin Warsh’s first congressional testimony for further clues on the interest-rate outlook.

According to Tony Sycamore, market analyst at IG, gold remains highly sensitive to both geopolitical developments and incoming U.S. inflation data.

He said gold found support near the psychologically important $4,000 level last week, and a sustained break above $4,200-$4,220 would strengthen the case for a broader recovery toward the 200-day moving average near $4,491.

However, Sycamore warned that a stronger-than-expected CPI report could reinforce expectations for another Fed rate hike before year-end and bolster the greenback, adding pressure on bullion. A softer inflation reading, by contrast, could help gold stabilize after recent losses.

The US Dollar Index edged higher by 0.3% on Monday, adding further pressure on dollar-denominated bullion. 

Gold prices slipped on Friday and were headed for weekly losses as a flare-up in U.S.-Iran military action spurred concerns over higher inflation and interest rates. 

Silver and platinum prices were also set to drop this week, as oil prices rose and the dollar steadied from last week’s losses.

Spot gold fell 0.6% to $4,101.11 an ounce, while gold futures fell 0.8% to $4,108.90/oz by 04:46 ET (08:46 GMT). 

Spot gold was trading down about 1.8% this week. 

Gold heads for weekly loss on Iran, rate uncertainty

Gold was spooked by the U.S. launching a series of attacks against Iran this week, which sent oil prices soaring. 

U.S. President Donald Trump declared that a ceasefire with Iran was over, and ordered more attacks against the country, drawing retaliatory measures from Tehran.

While an Axios report said regional mediators were attempting to salvage a recent U.S.-Iran memorandum of understanding, peace in the Middle East appeared wholly uncertain.

The jump in oil prices fueled concerns over energy-driven inflation, which could in turn elicit a more hawkish stance from the Federal Reserve. Markets were seen steadily raising their bets on a Fed rate hike in 2026 this week, CME Fedwatch showed. 

Higher rates bode poorly for non-yielding assets like gold, given that they increase the opportunity cost of investing in the metal over debt. 

"Gold found some support on expectations of limited escalation in the Middle East conflict. This is despite earlier concerns that a rebound in energy prices could see the Fed keeping interest rates higher for longer to combat stubbornly high inflation," ANZ analysts wrote in a note.

Gold has largely underperfomed as a safe haven since the onset of the U.S.-Iran war, as concerns over sticky inflation and interest rates largely overshadowed its haven appeal. 

Other precious metals logged a mixed performance this week. 

Spot silver slid 0.7% to $59.5250/oz on Friday, but was down more than 4% this week.

Spot platinum edged lower by 0.1% to $1,616.14/oz, but fared better than its metal peers this week with a 0.3% drop. 

The euro and the British pound clung to modest gains on Thursday, recovering slightly from near one-week lows as foreign exchange markets balanced less-hawkish-than-feared Federal Reserve minutes against a fresh Middle East energy shock that threatened to cement a "higher-for-longer" interest rate paradigm.

The euro and the pound both firmed 0.1% in London trade, attempting to claw back territory after Wednesday’s declines were triggered by a dramatic geopolitical relapse that briefly sent traders scrambling for the safety of the greenback.

"The FX reaction was more muted, where the dollar was a little stronger, but the biggest impact was a jump in volatility and the unwinding of carry trade positions in the EM high-yielders," said Chris Turner, global head of markets at ING. 

Dollar steady as traders digest Iran tensions, Fed minutes 

The dollar index was flat on Thursday after a volatile overnight session.

The rapid swing in currency volatility highlights profound investor exhaustion across global trading desks.

Just weeks after a June 17 interim ceasefire agreement raised hopes of diplomatic stability, the sudden collapse of the deal - marked by U.S. President Donald Trump declaring the truce "over" and launching successive days of air strikes to open the Strait of Hormuz - shattered market complacency.

Yet, rather than fueling a prolonged rush into the safe-haven dollar, the geopolitical escalation collided with a surprisingly nuanced domestic narrative from Washington.

The slight retreat came after the minutes from the Federal Reserve’s June policy meeting revealed that officials were surprisingly divided over the necessity of further interest rate hikes, cutting through some of the market’s most hawkish fears.

While the Fed minutes provided a brief relief valve for European currencies, the greenback’s downside remained heavily restricted, keeping it within striking distance of recent 13-month peaks.

The primary transmission mechanism holding the dollar aloft is the commodity market. With crude oil prices surging on the back of Gulf military action, foreign exchange markets are forced to resurrect the threat of sticky, cost-push inflation.

Because Fed policymakers explicitly flagged inflation as their primary concern in the June minutes, any sustained energy shock increases the probability that the central bank will keep U.S. rates elevated well into the winter - a structural advantage that continues to support the dollar over its peers.

Meanwhile, the Japanese yen (USD/JPY) hovered precariously close to its weakest levels in 40 years. The persistent depression of the yen kept Tokyo authorities on high alert, with repeating warnings from government officials fueling intense speculation over an imminent physical currency intervention.

In other regional trading, the commodity-sensitive Australian dollar edged slightly higher, while the South Korean won remained flat amid heightened volatility in Seoul’s equity benchmarks.

U.S. President Donald Trump has expressed pessimism around a framework peace deal with Iran, saying he believes that the truce is "over" after an exchange of attacks overnight.

Speaking at a NATO summit in Turkey, Trump accused Tehran of double-dealing and cast doubt around the status of the agreement. 

"We make a deal, and everyone’s agreed. No nuclear weapons. We make a deal. They go outside, talk to the press, they say we never even talked about it. There’s something wrong with them. They’re cuckoo. As far as I’m concerned, it’s over," Trump said.

But he did not say if the U.S. would resume the war against Iran, and hinted that he would be open to negotiations continuing should both parties be willing to engage with each other.

The comments came after Iranian armed forces said on Wednesday they had attacked U.S. military sites in Kuwait and Bahrain, in retaliation to American strikes on targets in Iran and Washington’s decision to revoke a sanctions waiver on Iranian oil.

In a statement cited by Iran’s state news agency, the paramilitary Islamic Revolutionary Guards Corps said it had struck 85 U.S. military sites and shot down an American MQ-9 drone.

The Khatam al-Anbiya Central Headquarters, which is a part of the Iranian military, also said that the U.S. strikes on locations in southern Iran were a "blatant act of aggression," adding that "under no circumstances will we allow interference in the affairs or management of the Strait of Hormuz."

Earlier, the Pentagon said that its strikes were a response to recent Iranian attacks on commercial vessels attempting to traverse the strait, a vital conduit for global oil shipping. The waterway partially straddles Iran’s southern coast. U.S. Central Command also claimed that it had struck more than 80 targets in Iran, as well as more than 60 IRGC small boats in and around the strait.

Meanwhile, the U.S. Treasury Department’s Office of Foreign Assets Control revoked the general license authorizing the production, delivery, and sale of crude oil, petrochemical products, and petroleum products of Iranian origin.

Tehran has not claimed responsibility for attacks on Tuesday on the ships off the coast of Oman, which included a Saudi oil tanker and a Qatari vessel laden with liquefied natural gas.

Mohammad Bagher Ghalibaf, Iran’s Parliament Speaker and top negotiator, accused Washington of violating a 14-point memorandum of understand signed by both sides in June. Writing on X, Ghalibaf said Washington’s actions were "violating Iranian adjustments" in the strait, which had been reopened under the terms of the preliminary deal.

The tit-for-tat strikes have threatened to derail talks over a permanent agreement to wind down hostilities, as well as a nascent rebound in oil flows through the Strait of Hormuz. Discussions are now reportedly paused for funeral ceremonies honoring former Iranian Supreme Leader Ayatollah Ali Khamenei, who was killed in a barrage at the onset of a joint U.S.-Israeli assault on Iran in late February.

Against this backdrop, oil prices marched higher, clawing back some recent losses recorded in the days after the signing of the framework peace deal on June 17. A jump in crude prices following the start of the war sparked fears of an inflation wave hitting countries around the world.

Gold prices sank on Tuesday, with investors gearing up for the release of minutes from the Federal Reserve’s latest policy meeting later this week.

By 05:30 ET (09:30 GMT), spot gold had fallen by 1.0% to $4,124.28 an ounce, while gold futures had dropped by 0.8% to $4,136.29 an ounce.

Denting sentiment around bullion was the U.S. dollar, which has been buoyed by an uptick in benchmark 10-year U.S. Treasury yields to a two-week high. A firmer greenback can make the yellow metal more expensive for overseas buyers.

"[Foreign exchange] volatility may stay capped ahead of tomorrow’s FOMC minutes and given a rather empty U.S. data calendar today," analysts at ING said in a note.

Much of the focus this week is on the upcoming minutes from the Fed’s June meeting. At the gathering, the central bank left interest rates unchanged at a range of 3.5% to 3.75%, although several officials projected that a borrowing cost hike may be coming this year.

Meanwhile, new Fed Chair Kevin Warsh has stressed that he does not want the Fed to offer forward guidance on rates, although did note at an event last week that inflation risks have eased.

Oil prices have retreated following an interim ceasefire deal between the U.S. and Iran in June, while payrolls data last week was softer than anticipated. How the Fed chooses to calibrate rates against this backdrop remains a key source of uncertainty, particularly for gold’s outlook. Higher rates can make non-yielding assets like the metal less attractive.

According to the CME FedWatch Tool, traders now see about a 56% chance of a rate hike as soon as September, down from 60% before the release of the employment figures.

U.S. stock index futures mostly edged higher on Monday, as investors returned after a long holiday weekend.

By 05:34 ET (09:34 GMT), the Dow futures contract was mostly unchanged, S&P 500 futures had climbed by 32 points, or 0.4%, and Nasdaq 100 futures had risen by 289 points, or 1.0%.

The major indexes ended the last, holiday-shortened week in the green. The blue-chip Dow Jones Industrial Average added almost 2% last week, while the benchmark S&P 500 and tech-heavy Nasdaq Composite climbed by 1.8% and 2.1%, respectively.

A weaker-than-expected June U.S. jobs report released eased concerns about near-term monetary tightening, helping fuel the rally in equities.

The uptick came even as questions swirled around lofty valuations in artificial intelligence-exposed stocks. Capital expenditures on the infrastructure needed to power the nascent technology have soared, raising doubts over when, if ever, the spending will translate into returns.

Semiconductor stocks, in particular, have been dented against this backdrop. Over the last two weeks, the Philadelphia Semiconductor Index -- a key tracker of the chipmaking sector -- has shed 12%, although it is still higher year-to-date.

Meanwhile, minutes from the Federal Reserve’s June meeting are due on Wednesday. The release could offer further insight into the central bank’s interest rate path. Borrowing costs were left on hold at a range of 3.5% to 3.75% at the gathering, although official projections hinted at a possible rate hike this year.

New Fed Chair Kevin Warsh has also suggested that he may reveal a slate of appointees to his task forces designated to review the central bank’s practices in everything from communications to data analysis. 

On the earnings front, traders will also monitor the start of second-quarter results, with Levi Strauss & Co, PepsiCo (NASDAQ:PEP) and Delta Air Lines (NYSE:DAL) among the first major companies to report. 

Beyond stocks, oil prices edged down after the OPEC+ producer group once again boosted its output quotas over the weekend.

"[I]t was fairly status quo on the macro front over the weekend, although oil continues to drift lower as the case for supplies to expand beyond where they stood before the war grows stronger," analysts at Vital Knowledge said in a note.

Oil prices were steady on Friday ahead of the long U.S. holiday weekend, although investors kept tabs on hopes for a prolonged de-escalation in tensions between the U.S. and Iran.

Brent crude futures, the global oil benchmark, was higher by 0.2% at $71.96 a barrel at 05:21 ET (09:21 GMT), while U.S. West Texas Intermediate crude futures were little changed at $68.66 a barrel.

Traders have unwound some geopolitical risk premium following the signing of an interim Middle East peace deal last month, with the prospect of improving Gulf crude flows reinforcing expectations of ample near-term supplies. 

Investors continued to monitor negotiations between Washington and Tehran after U.S. President Donald Trump said he believed Iran had "agreed to just about everything we need," signaling confidence that discussions were making progress.

However, the Wall Street Journal reported that Tehran has resisted a proposal to renounce its claims over the Strait of Hormuz in exchange for the release of billions of dollars in frozen Iranian funds. The report said Washington had offered financial incentives, including access to frozen assets, to secure unrestricted passage through the strategic waterway, although Iran has so far rejected the proposal.

Control of the strait, which Tehran effectively shuttered following the onset of a joint U.S.-Israeli assault in late February, has become a key sticking point in peace talks. However, media reports have indicated that shipping activity in the narrow waterway is showing some signs of recovery.

Oversupply concerns weigh

ANZ said a recent build-up in short positions has been a major driver behind a weakening in crude futures, although some investors have pared bearish bets ahead of the U.S. Independence Day weekend.

The bank said Brent’s futures curve remains in contango, with prompt prices trading below longer-dated contracts, signaling expectations of near-term oversupply. Recovering crude flows through the Strait of Hormuz have reinforced that view, while Saudi Arabia’s exports have recovered to around 90% of their pre-war levels.

At the same time, lower crude prices have encouraged buying by China’s independent refiners, supported by more flexible pricing from Saudi Arabia and Kuwait. Even so, ANZ noted Iran continues to struggle to market its crude, with more than 58 million barrels remaining in floating storage and over 90% yet to secure a destination, according to Vortexa.

Spot gold prices ticked higher on Thursday, as investors prepared for upcoming U.S. employment data which could factor into how the Federal Reserve approaches interest rate decisions in the coming months.

By 06:37 ET (10:37 GMT), spot gold had risen by 0.8% to $4,065.05 an ounce, while gold futures had dipped by 0.1% to $4,077.42 an ounce.

The U.S. economy is tipped to have added 114,000 jobs in June, down from 172,000 in May but still hovering around robust levels. The unemployment rate, meanwhile, is tipped to remain at the 4.3% level it has been at since March.

Over the past three months, the all-important nonfarm payrolls reports have all surpassed projections, pushing up the three-month average of payrolls to a two-year peak of 188,000.

"Our forecast suggests a solid job market, reconfirming that the labor market has reaccelerated from its last year’s soft patch," analysts at Morgan Stanley said in a note.

Signs of continued labor market resilience could grant the Fed more room for potential interest rate hikes this year, especially as policymakers flag concerns over energy-fueled inflation. Oil prices have moderated following the signing of a framework peace agreement between the U.S. and Iran last month, but uncertainty has continued to swirl around whether a crude price spike following the start of a joint U.S.-Israeli assault on Iran in late February will contribute to prolonged inflationary pressures.

Analysts at Deutsche Bank said a "hawkish repricing" in Fed expectations has occurred in recent weeks. Investors are now forecasting the Fed could hike interest rates as soon as September, according to CME’s FedWatch. In theory, lifting rates can corral inflation, albeit at the risk of weighing on the labor market and wider economic growth.

Those hawkish bets were slightly dented this week, particularly after a separate report -- which is less comprehensive than the NFP figure -- showed that private sector payrolls rose by less than forecast in June. On Wednesday, new Fed Chair Kevin Warsh also suggested that inflation risks had eased in the U.S., fueling speculation that the Fed may opt not to raise rates as soon as this month.

The outlook for rates is key for gold, as it can influence the opportunity cost of holding a non-yielding asset like the yellow metal.

Meanwhile, the U.S. dollar index weakened slightly, yet the potential of a more hawkish Fed trajectory has kept the currency floating well above pre-conflict levels. A stronger dollar can bode poorly for bullion, making it more expensive for overseas buyers.

"The firmer currency backdrop [...] is prompting investors to reassess positioning after a volatile few weeks," said Neil Welsh, Head of Metals at Britannia Global Markets, in a note.

Oil prices dipped on Wednesday, as markets kept tabs on a trip by U.S. and Iranian delegates to Qatar for separate peace talks with mediators.

At 04:50 ET (08:50 GMT), U.S. Crude Oil WTI Futures dropped 1.2% to $68.68 a barrel, while Brent Oil Futures retreated by 1.2% to $72.12 a barrel.

Traders remained focused on developments in Doha after Iran ruled out direct talks with senior U.S. envoys who had traveled to the region, instead saying any discussions would be conducted through mediators at the technical level. The shift clouded prospects for a swift agreement to turn the two-week-old ceasefire into a lasting peace deal.

The recovery follows a sharp pullback in crude prices after the Iran conflict. Brent tumbled about 38% during the second quarter after surging roughly 94% in the first quarter, marking its steepest quarterly decline since the record 66% plunge in the first quarter of 2020. The global benchmark also fell about 21% in June after a 19% decline in May, its biggest monthly drop since March 2020, as fears of prolonged supply disruptions through the Strait of Hormuz eased.

Geopolitical risks remain in focus

The absence of direct talks has reinforced uncertainty over how quickly Washington and Tehran can resolve outstanding issues under their 60-day negotiating framework, including the future of the Strait of Hormuz.

While the weekend saw renewed exchanges that briefly rattled the fragile truce, shipping through the Strait of Hormuz has begun to recover, with Kpler data showing about 24 commodity vessels, including crude and LNG tankers, transited the waterway on Monday, with traffic remaining steady into Tuesday.

ANZ said hopes for a lasting peace agreement weighed on crude prices, but cautioned that uncertainty over the future governance of the Strait of Hormuz continues to cloud the outlook. The bank noted Iran has reiterated its intention to oversee maritime traffic through the strategic waterway, underscoring that shipping security remains a key risk for energy markets.

Supply outlook remains uncertain

On the supply side, fresh U.S. Energy Information Administration data showed domestic crude production climbed to a record 13.93 million barrels per day in April, as producers ramped up output in response to higher prices during the Iran conflict.

While stronger U.S. supply could limit further gains, analysts believe geopolitical risks continue to provide underlying support. ANZ’s China Commodity Index rose 0.5%, with the energy component also advancing 0.5%, pointing to resilient commodity demand even as crude prices have retreated from recent highs.

Markets are now watching for further progress in the Doha negotiations and upcoming U.S. inventory data for fresh direction on oil prices.