Gold prices rose on Tuesday, rebounding from a more than one-month low hit in the previous session, though gains remained limited as elevated crude oil prices kept inflation fears alive and clouded the U.S. interest rate outlook. Spot gold was up 0.5% at $4,541.39 per ounce as at 10.30 in Singapore, according to The Business Times. US gold futures for June delivery rose 0.4% to $4,550.70. The recovery came after gold experienced a more than 2% drop on Monday when it hit its lowest level since March 31, as noted by The Business Times. Ilya Spivak, head of global macro at Tastylive, observed that prices seem to be digesting a bit after the return of 'war trade' across markets sent gold lower Monday, suggesting some stabilization in market sentiment.
Gains were capped as Treasury yields and the dollar pushed higher as a rebound in crude oil stoked inflation fears, as noted by Ilya Spivak, head of global macro at Tastylive. The dollar rose and Brent crude oil hovered above $113 a barrel as the U.S. and Iran continued to work toward a truce while trading blows over the Strait of Hormuz. A stronger U.S. currency makes dollar-priced metals more expensive for holders of other currencies, while higher crude oil prices can stoke inflation, increasing the likelihood of higher interest rates. Spivak stated that this weighed against gold, which is non-interest bearing and anti-fiat, highlighting the metal's vulnerability to rising rates. While gold is considered an inflation hedge, high interest rates make yield-bearing assets more attractive, weighing on its appeal.
Traders have largely priced out U.S. interest rate cuts for this year, with markets now seeing a 37% chance of a hike by March 2027, compared with 27% of a reduction a week earlier, as reported by The Business Times. The U.S. and Iran launched new attacks in the Gulf on Monday as they wrestled for control over the Strait of Hormuz with maritime blockades, shaking a fragile truce. While gold is considered an inflation hedge, high interest rates make yield-bearing assets more attractive, weighing on its appeal. Investors now await a slew of key U.S. data this week, including job openings, the ADP employment report, and the April payrolls report. Market participants expect that the Fed will leave its interest rate policy on hold for the rest of this year due to inflationary pressures from the global energy crisis.
Other precious metals showed mixed performance, with spot silver edging 0.4% higher to $73.03 per ounce, platinum gaining 1.3% to $1,970.85, and palladium up 1.2% at $1,497.91, according to The Business Times. The U.S. military said on Monday it destroyed six Iranian small boats and intercepted Iranian cruise missiles and drones as Tehran sought to thwart a new U.S. naval effort to open shipping through the Strait of Hormuz. The Australian dollar was last 0.08% down at $0.7162 after the Reserve Bank of Australia raised rates on Tuesday for the third time this calendar year.
