Gold Pressured by Dollar Strength

Gold held below $4,200 an ounce on Tuesday, remaining under pressure as the US dollar climbed to an 18-month high ahead of key inflation reports that could shape the Federal Reserve’s next interest rate decision. The US consumer price index is due on Wednesday, followed by producer inflation data on Thursday. Markets are pricing in roughly an 80% probability that the Fed will leave interest rates unchanged this month, while assigning nearly an 88% chance of a rate hike in December. Investors also monitored geopolitical tensions as the US considers joining Saudi Arabia in its campaign against Iran-backed Houthi militants in Yemen, while the recently announced Russia-Ukraine “energy ceasefire” has already been violated. These developments have kept oil prices elevated, fueling inflation concerns and increasing expectations of further interest rate hikes.

Gold prices eased to around $4,170 an ounce on Monday after reaching a one-week high earlier in the session, as a firm US dollar weighed on bullion and investors awaited key inflation data that could influence the Federal Reserve’s interest-rate outlook. The dollar remained near its strongest level in 18 months, supported by tensions in the Middle East and caution ahead of this week’s US consumer and producer price reports and retail sales data. Stronger-than-expected readings could reinforce expectations of tighter monetary policy, pushing Treasury yields and the dollar higher and placing further pressure on gold. Markets have scaled back expectations for a Fed rate hike this month, with traders pricing in less than a 20% probability of an increase, while assigning an 85% chance of a hike by December, according to CME’s FedWatch tool. Investors will also monitor this week’s IMF-World Bank annual meetings for further signals from global central bankers on the monetary policy outlook.

Gold prices traded near $4,200 an ounce on Monday after rising for two straight sessions, as falling oil prices, driven by hopes that Russian diesel supplies could ease global fuel shortages, helped alleviate inflation concerns. On Friday, President Donald Trump said his administration had reached an agreement for Russia to supply hundreds of thousands of tons of diesel, signaling a partial lifting of Moscow’s ban on diesel exports. Trump also claimed that Russia and Ukraine had agreed to an “energy ceasefire” effective immediately. Meanwhile, Saudi Arabia’s main airport was targeted again on Sunday by Iran-backed Houthi militants, a day after a strike killed 12 people and injured more than 300. The attacks prompted Trump to consider joining Saudi Arabia in retaliatory action against the Houthis in Yemen. Elsewhere, investors looked ahead to key US inflation figures this week that could offer fresh clues on the Federal Reserve’s next policy move.