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

Gold prices remained near a seven-week low on Tuesday, as concerns grew that the Federal Reserve might maintain higher interest rates for an extended period. Investors were also waiting for a variety of US economic indicators, such as job openings, ADP employment, personal consumption expenditures (PCE), and nonfarm payrolls, which are set to be released this week. Spot gold was $4,124.57 per ounce at 0140 GMT, unchanged from the previous day after reaching its lowest level since August 5.

Christopher Tahir, a senior market strategist at Exness, noted that geopolitical developments would continue to be a key factor affecting gold prices. He explained that ongoing tensions could keep energy prices and yields elevated, while progress towards de-escalation might help alleviate pressure. US and Iranian officials were engaged in separate talks with mediators as part of a renewed effort to end the seven-month-long conflict.

Oil prices climbed for the second day in a row, driven by uncertainty over supply disruptions in the West Asia region. Rising oil prices can contribute to inflation by increasing costs across the economy, possibly prompting central banks to raise interest rates to curb price pressures. However, gold is often viewed as an inflation hedge, and its value tends to decline in a high-rate environment as investors seek assets that generate returns.

Currently, there is a 70.3% probability of a Federal Reserve rate hike in October, according to the CME's FedWatch Tool. In a recent statement, Fed Governor Lisa Cook indicated that she anticipates continued inflationary pressure 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 necessary.

Investors are closely monitoring a series of US economic data releases expected this week, which could provide fresh insights into the outlook for monetary policy. Persistent price pressures coupled with robust economic activity could reinforce the belief that central banks need to maintain restrictive measures, keeping yields elevated and leaving gold susceptible to further declines. Among other precious metals, spot silver fell 0.6% to $60.62, platinum slipped 1% at $1,699.86, and palladium lost 0.5% to $1,209.08.