Gold Bounces From Two-Week Low as All Eyes Turn to US Inflation Data

International gold prices ticked higher in Asian trading Tuesday, bouncing from a two-week low hit the previous session. Spot gold was at $4,013.93/oz as of Tuesday afternoon in Asia, up 0.3% on the day^[CNBC]. Markets are awaiting a heavy slate of U.S. economic data this week, led by the June CPI report, for clues on the inflation path and the Fed’s next move. Meanwhile, escalating U.S.-Iran tensions in the Strait of Hormuz have pushed crude prices sharply higher, reinforcing expectations that the Fed will keep rates elevated for longer—a dynamic that weighed heavily on gold last week.

Middle East Tensions Lift Oil and Rate-Hike Odds, Weighing on Gold

Gold fell for a second straight session on Monday. According to Reuters, spot gold dropped 1.4% to $4,061.64/oz^{[Reuters via Kitco]}. Earlier Monday, it hit an intraday low of $4,055.40/oz, a 1.55% decline^[Kitco]. Kitco’s morning report noted that the U.S.-Iran confrontation in the Strait of Hormuz sent oil prices surging, lifted U.S. Treasury yields, and rekindled fears that energy-driven inflation could force the Fed to maintain a tight policy stance for longer^[Kitco].

“Renewed hostilities in the Gulf region have rekindled market concerns about inflation and further Fed tightening, creating additional headwinds for gold through higher bond yields and a stronger dollar,” said Ole Hansen, analyst at Saxo Bank^{[Reuters via Kitco]}. Hansen added that with the market focused on Middle East tensions and higher oil prices, combined with low liquidity during the summer holiday season, these key risks could push gold out of its current $3,900–$4,200 range^{[Reuters via Kitco]}.

According to the CME FedWatch Tool, traders now price in roughly a 69% probability of a Fed rate hike in September, up from 63% last week^{[Reuters via Kitco]}. Higher rates increase the opportunity cost of holding non-yielding assets like gold.

Macro Data and Fed Testimony in Focus This Week

The U.S. economic calendar is packed this week, and markets widely expect these data points to offer clearer signals on the Fed’s policy path. Beyond Tuesday’s June CPI report, the week also brings the PPI, retail sales, and weekly jobless claims^{[Reuters via Kitco]}.

In addition, Fed Chair Kevin Warsh will deliver his first congressional testimony on Tuesday and Wednesday. Markets will be parsing his views on the economy, inflation, and monetary policy objectives for further clues on the rate path^{[Reuters via Kitco]}.

Kitco analysts noted that a softer CPI print would ease pressure from real yields, giving gold a clearer path to reclaim the $4,091–$4,107 resistance zone. However, if oil prices spike again on Middle East tensions, markets will remain fixated on inflation risks and the Fed’s response^[Kitco].

Technicals and Positioning: Bears in Control, Net Longs Shrink

On the technical front, Kitco’s report noted that spot gold bears hold the near-term technical advantage, with prices still below the 50-period EMA near $4,107 and continuing to test the breakdown area of a symmetrical triangle^[Kitco]. The next upside target for bulls is to push prices back above $4,091 and then sustain a rally to $4,107 and beyond to $4,140. The near-term downside target for bears is a break below the $4,000 handle, with deeper targets at $3,959 and $3,942^[Kitco].

On the positioning front, data released Friday showed that speculative net long positions on COMEX gold futures fell by 1,964 contracts to 114,854 in the week ended July 7, the first decline after three consecutive weeks of increases^{[Reuters via Kitco]}.

Among other precious metals, spot silver fell 2.4% to $58.4181/oz on Monday, platinum dropped 0.5% to $1,619.98, and palladium slipped 0.8% to $1,266.10^{[Reuters via Kitco]}.

This content is for informational purposes only and does not constitute investment advice, trading advice, or any guarantee of returns.