Gold lingers near seven-week low ahead of US economic data

Gold prices remained near a seven-week low on Tuesday as investors anticipated a possible prolonged period of higher interest rates from the Federal Reserve. The precious metal, trading at $4,124.57 per ounce, had reached its lowest level since August 5 in the previous session. US gold futures declined by 0.3% to $4,156.70.

Christopher Tahir, a senior market strategist at Exness, suggested that geopolitical tensions would continue to influence gold prices. He noted that ongoing conflicts could maintain high energy prices and yields, while progress in resolving these issues might alleviate pressures on the market.

Recent developments showed that US and Iranian officials were engaging in separate discussions with mediators to de-escalate the seven-month-long war. However, rising oil prices present a challenge for gold, a traditionally perceived as an inflation hedge. Higher oil prices can increase costs across the economy, potentially prompting central banks to raise interest rates to control price pressures.

According to the CME’s FedWatch Tool, there is a 70.3% chance of a Federal Reserve rate hike in October. Fed Governor Lisa Cook indicated that she expects persistent inflationary pressures in the coming months due to AI-related demand and higher oil prices, though she did not explicitly state that additional rate hikes would be required.

Investors are closely monitoring upcoming US economic data, including job openings, ADP employment, personal consumption expenditures (PCE) figures, and nonfarm payrolls, for valuable insights into the trajectory of monetary policy. Tahir warned that persistent price pressures coupled with robust economic activity could strengthen the case for central banks to maintain restrictive measures, keeping yields elevated and potentially pressuring gold further.