XAU/USD rises amid a softer US Dollar but faces pressure from Iran war-driven inflation fears and Fed rate hike expectations.
Gold prices (XAU/USD) rebounded to around $4,565 during early Asian trading on Tuesday, recovering from a one-and-a-half-month low. The move follows a decline in the US Dollar (USD) against major currencies as traders assess progress in the Iran war and its economic implications.
The precious metal’s gains may be capped by rising inflation concerns tied to higher energy prices and expectations of tighter US monetary policy. Markets are pricing in a 35% chance of a 25 basis point Fed rate hike by year-end, according to the CME FedWatch tool. Gold, a non-yielding asset, typically struggles in high-rate environments.
While geopolitical uncertainty often boosts demand for gold as a safe-haven asset, its appeal dims when interest rates rise, reducing its attractiveness relative to yield-bearing investments.