Gold Drops Ahead of US Inflation Data

Gold prices dropped to $4,300 per ounce on Tuesday, returning to levels last seen in December 2025, as investors shifted focus to the upcoming US inflation report, due Wednesday, with expectations that the inflation rate climbed to 4.2% in May, its highest level in nearly three years, driven by a surge in energy prices. The anticipated inflation rise follows last week’s stronger-than-expected US jobs report, which showed the economy added 172,000 jobs in May, well above forecasts. This prompted investors to increase bets on Federal Reserve interest rate hikes this year, with traders now pricing in about a 70% chance of a rate hike in December. Elsewhere, developments in the Middle East suggested a possible deal, as Iran and Israel announced they had halted attacks on each other following an appeal from US President Donald Trump. This pushed oil prices lower, offering some relief to inflation fears, though uncertainty remains.

Gold strengthened above $4,300 an ounce on Tuesday after Iran and Israel agreed to halt attacks against each other, alleviating fears of a wider escalation that raises energy-driven inflationary risks. President Donald Trump also said both sides were seeking an immediate ceasefire and that final negotiations were moving forward. Still, bullion remained near its lowest level since late March as the dollar and Treasury yields rallied following stronger-than-expected US jobs data, reinforcing expectations that the Federal Reserve could raise interest rates by year-end. Markets are now pricing in roughly a 70% chance of a quarter-point rate increase in December. Investors are also awaiting US CPI and PPI data later this week for fresh signals on the Fed’s policy outlook.

Gold trimmed earlier losses to trade at $4,330 an ounce on Monday, after hitting its lowest since March 23 but remaining near its weakest close since late last year, as investors assessed the latest Middle East developments. Israel agreed to halt strikes on Iran at US President Donald Trump’s request but vowed to continue heavy bombing in Lebanon. Meanwhile, tensions escalated along the Israel-Lebanon border, with mutual shelling reported. Earlier, Trump had called for an immediate ceasefire, and Tehran paused its operations against Israel while warning against strikes on southern Lebanon. Higher oil prices, inflation concerns and a robust US jobs report last week increased expectations of a Federal Reserve rate hike, with markets now assigning a 70% probability to a December increase, up from 45% a week earlier, per the CME FedWatch tool. Investors are now looking to key inflation data, such as Wednesday’s CPI and Thursday’s PPI, for further insights into monetary policy.