XAU/USD rises on subdued USD demand despite Fed hike expectations and geopolitical tensions driving inflation concerns.
Gold prices climbed to a multi-day high above $4,050 in early trading, supported by a softer US Dollar (USD) amid diplomatic hopes between the US and Iran. The potential for talks has curbed fresh USD bullish bets, providing a tailwind for the non-yielding metal.
Investors remain cautious, however, as disruptions in global oil supplies—driven by restricted traffic in the Strait of Hormuz and a Houthi maritime blockade—fuel inflation fears. The CME Group’s FedWatch Tool shows an 83% probability of a Fed rate hike by year-end, reinforcing expectations for higher-for-longer US interest rates.
While geopolitical risks could bolster the USD’s reserve status, near-term pressure on the Greenback has allowed gold to extend gains, though upside may be limited by hawkish Fed expectations.