Gold Pressured by Fed Rate Hike Expectations

Gold fell below $4,150 an ounce on Tuesday, giving back gains from the previous session as firm expectations for Federal Reserve interest rate hikes outweighed optimism surrounding ongoing US-Iran peace negotiations. Both Deutsche Bank and BofA Global Research have revised their forecasts to include a rate increase in September. Investors are now focused on this week’s PCE report, which contains the Fed’s preferred inflation gauge and is expected to offer fresh insight into underlying price pressures. Meanwhile, Washington granted Iran a 60-day license to sell oil on international markets, boosting expectations of a faster recovery in global supply. Shipping through the Strait of Hormuz has also increased, with producers such as Kuwait and the United Arab Emirates finding alternative export routes, while Iran shipped more than 30 million barrels over the past week.

Gold held near $4,200 an ounce on Tuesday, maintaining gains from the previous session as early signs of progress in ongoing peace talks between the US and Iran helped ease concerns about inflation. In a significant development, Washington issued Iran a 60-day license to sell oil on international markets, fueling expectations of a faster recovery in global supply. Shipping activity through the Strait of Hormuz has also increased, with producers such as Kuwait and the United Arab Emirates finding alternative ways to export energy, while Iran shipped more than 30 million barrels over the past week. Gold has come under constant pressure since the Middle East conflict erupted in late February, as disruptions to energy flows through Hormuz drove oil prices higher and reinforced expectations that central banks raise interest rates to contain inflation.

Gold climbed toward $4,200 an ounce on Monday, recouping some losses from recent sessions as oil prices fell further following reports that the US and Iran had agreed on a roadmap toward a final peace deal within 60 days. The development helped ease market concerns after both sides recently exchanged threats over the conflict in Lebanon, with Tehran claiming it had once again closed the Strait of Hormuz. However, millions of barrels of crude continued to pass through the waterway over the weekend, while Persian Gulf producers prepared to increase output. Investors also looked ahead to this week’s release of the US PCE price index, the Federal Reserve’s preferred measure of inflation. Last week, the Fed left interest rates unchanged but maintained a more hawkish stance. Nine of the Fed’s 19 policymakers now project at least one rate increase this year, with markets increasingly betting on a hike as early as September.