Gold Nears Two-Month High Ahead of Wednesday's CPI Report

Gold prices surged past $4,450 an ounce on Tuesday, marking the highest level in nearly two months. This increase was fueled by a deadlock in the U.S.-Iran deal that would reopen the Strait of Hormuz, keeping oil prices high. Traders were also on edge, anticipating the release of the U.S. inflation report on Wednesday, which could determine if a September Federal Reserve interest rate hike is still possible.

Silver prices surpassed $65 for the second day in a row, continuing its climb to a seven-week high. This trend can be traced back to last Friday's disappointing U.S. jobs report, which revealed 23,000 job losses in July. This news reduced the odds of a September rate hike from 67% to 46%, according to Kalshi pricing. However, the oil market is complicating the outlook for lower rates.

Brent crude prices climbed toward $90 a barrel, while U.S. West Texas Intermediate (WTI) crude topped $84 on Tuesday. Both prices represent a 5% increase from Monday, driven by President Trump's demand for Iran to pay compensation for war damage. This demand added a new obstacle to the deal that would have unblocked the Strait of Hormuz.

Analysts noted a significant divide between the U.S. and Iran, indicating a lack of progress in negotiations. Economists surveyed by Kiplinger predict that the July CPI report released on Wednesday will show a 0.1% increase in headline inflation on a month-over-month basis and a 3.4% increase annually. Core prices are expected to rise by 2.5% year over year.

Either number could influence the market's sentiment about whether cooling job data or oil-induced inflation risk will have the upper hand before the Fed's meeting in September.