Gold continued its strong performance on Tuesday, holding near its highest levels in more than two months despite several factors that would normally weigh on the precious metal, including a stronger U.S. dollar, higher Treasury yields and rising energy prices. Spot gold climbed to around $4,407.79 an ounce, while gold futures advanced to $4,467.59. Silver slipped to $65.41 an ounce, while platinum posted a modest gain to $1,761.10.
Much of the current strength in gold stems from a shift in U.S. interest rate expectations following Friday’s employment report, which showed an unexpected decline in nonfarm payrolls during July. The data pushed gold up 2.4% in a single session before the metal closed Monday near $4,390, marking its highest daily close in almost ten weeks. What stands out is that gold maintained its momentum despite gains in the dollar and Treasury yields, suggesting that demand is being driven not only by monetary policy expectations but also by renewed safe haven buying, short covering and investors entering the market after missing the previous rally.
Attention is now turning to U.S. inflation figures, starting with the consumer price index followed by the producer price index. These releases are expected to play an important role in shaping interest rate expectations for the coming months. Markets currently assign a 52% probability to an interest rate increase in September and an 81% probability to an increase in December. If inflation data show that price pressures remain elevated, expectations for tighter monetary policy could strengthen and create additional resistance for gold, particularly because the metal does not generate interest income.
Geopolitical developments are providing another important source of support for gold. The situation surrounding the Strait of Hormuz remains unresolved. Although Iran has indicated that it is approaching an agreement with Oman on new shipping routes, Tehran continues to link a full reopening of the waterway to additional conditions that must be met by the United States. Stalled negotiations and growing disagreements over compensation have kept tensions elevated and pushed oil prices higher again, bringing energy driven inflation risks back into focus and potentially limiting the Federal Reserve’s room to adjust monetary policy.
Chinese demand is also providing a solid foundation for gold prices. The People’s Bank of China increased its gold reserves in July at the fastest pace since October 2023, reinforcing signs that official sector purchases remain strong. Meanwhile, the U.S. Dollar Index remained close to 99.8, providing little additional pressure on bullion and allowing gold to maintain its elevated levels.
From a price perspective, the area between $4,460 and $4,500 has become the key resistance zone for buyers. This range combines descending trend resistance with the 200 day moving average near $4,495. Continued trading below this area could lead to consolidation or profit taking, while a clear break and sustained move above $4,500 could change the structure of the market and provide room for a stronger advance, with $5,000 becoming a possible longer term target if momentum remains strong.
Oil prices also continued to rise after gaining more than 5% during Monday’s session. Brent crude traded near $87.93 a barrel, while West Texas Intermediate reached around $82.42. The main driver remains fading expectations for a rapid agreement on reopening the Strait of Hormuz, particularly as Washington and Tehran exchange demands for compensation and provide conflicting accounts regarding the status of the strategic waterway.
Iranian conditions, which reportedly include compensation and the lifting of sanctions before a full reopening of the strait, make a quick resolution more difficult. The importance of the issue to energy markets is substantial, as roughly one fifth of global oil supplies passed through the Strait of Hormuz before the conflict. Any prolonged disruption to shipping could keep the geopolitical risk premium elevated and make crude prices increasingly sensitive to political and military developments.
Supply concerns in the Red Sea have also returned to the forefront after the Houthis said they had targeted Saudi Aramco’s Jazan refinery. The group has also threatened to expand attacks against vessels and oil infrastructure in the region. These developments mean that the oil market is dealing not only with uncertainty surrounding the Strait of Hormuz but also with a broader range of geopolitical risks, helping explain why crude prices continue to receive support despite the sharp volatility seen across energy markets.
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