Gold Jumps as Soft US Inflation Tempers Fed Hike Expectations

Gold climbed nearly 2% to $4,080 an ounce on Tuesday after weaker-than-expected US inflation data prompted investors to scale back expectations for Federal Reserve interest rate hikes. Annual inflation eased to 3.5% in June, while core inflation slowed to 2.6%, both below forecasts. The CPI also fell 0.4% month over month, its first decline since 2020. Despite the slowdown, inflation remains well above the Fed's target. Investors now await Federal Reserve Chair Kevin Warsh's first congressional testimony for signals on the policy outlook. Money markets still assign more than a 50% chance of a rate hike by the end of the quarter, with expectations supported by renewed geopolitical tensions. President Donald Trump said the US would reinstate a blockade on Iranian vessels transiting the Strait of Hormuz and called on countries benefiting from US efforts to secure the key shipping route to help cover the costs.

Gold increased 2.08% to 4085.02 USD/t.oz

Gold rose above $4,000 an ounce on Tuesday but held most of the losses from the previous session, as President Donald Trump announced plans to reinstate a blockade on Iranian vessels transiting the Strait of Hormuz and sought reimbursement from countries benefiting from US efforts to secure the vital shipping lane. The move drove oil prices sharply higher, reviving concerns over inflation and the interest rate outlook. The measures followed renewed hostilities between Washington and Tehran, with the US targeting Iran’s ability to disrupt maritime shipping while Tehran retaliated against US allies in the region. Investors also awaited key US inflation data and Federal Reserve Chair Kevin Warsh’s testimony before the US Congress later today, with markets closely parsing his remarks for further policy guidance. Markets now price in roughly a 51% chance of a Fed rate hike in September, compared with a 23% probability that the central bank will leave rates unchanged.