Gold Prices Rise as Oil Prices Fall and Investors Await U.S. Inflation Data
Gold prices rose slightly during trading on Tuesday, supported by falling oil prices following the announcement of a ceasefire in the mutual attacks between Israel and Iran, while investors await U.S. inflation data that could determine the future of U.S. interest rates and market direction in the coming period.
Gold Prices Rise After Sharp Losses
The price of gold rose by about 0.8% to reach $4,351 per ounce, before retreating again to $4,325 per ounce, after the precious metal hit its lowest level in more than two months during the previous session due to a strong sell-off in the markets.
This recovery came amid improved investor sentiment following the easing of concerns regarding the escalation of the conflict in the Middle East, alongside falling oil prices that alleviated short-term inflationary fears.
Ceasefire Between Israel and Iran Calms Markets
Iran and Israel announced a halt to mutual attacks following intensive diplomatic efforts, with U.S. President Donald Trump noting progress in negotiations between the two sides and their pursuit of an immediate ceasefire.
These developments helped ease concerns about disruptions to global energy supplies, which directly impacted oil prices, causing them to give up most of their earlier strong gains.
Despite the current lull, Tehran has confirmed that it may resume military retaliation if Israeli operations against Hezbollah in Lebanon continue, keeping global markets on edge.
The Relationship Between Oil Prices, Gold, and Inflation
Oil is one of the main drivers of global inflation, as rising prices typically lead to higher production and transportation costs, which are reflected in the prices of goods and services.
Although gold is considered a safe haven and a hedge against inflation, rising interest rates resulting from increased inflationary pressures often negatively impact the precious metal, as it offers no yield to investors compared to other interest-bearing assets.
U.S. Interest Rate Forecasts Under Scrutiny
Investors are currently focusing on the U.S. Consumer Price Index (CPI) data for May, scheduled for release on Wednesday, which may provide important clues about the Federal Reserve’s monetary policy path in the coming months.
Market forecasts indicate a more than 70% probability that the Federal Reserve will raise interest rates by the end of the year, amid ongoing concerns that inflation rates will remain above target levels.
Goldman Sachs also expects the Federal Reserve to keep interest rates unchanged for a longer period, citing the strength of the U.S. labor market and improving economic activity, which could delay any potential rate cuts over the next year.
Gold Outlook Through the End of 2026
Many analysts continue to hold a positive long-term outlook on gold, with expectations that prices could return to an upward trend and target levels of $5,500 per ounce before the end of the year.
Experts believe that reaching these levels requires a weakening of the U.S. dollar, a decline in U.S. Treasury yields, continued strong demand from central banks around the world, and stable energy prices.
Despite the positive long-term outlook, the technical picture for gold remains bearish in the short term.
The precious metal faced strong selling pressure last week, leading to a break below the 200-day simple moving average an important technical indicator that many traders view as a sign of a weakening uptrend.
Furthermore, any resurgence of geopolitical tensions or a new spike in oil prices could heighten inflation fears, supporting expectations of continued tight monetary policy and placing additional pressure on gold prices.
