Gold traders brace for CPI test as Iran-Israel tensions ease slightly

Gold prices were little changed on Tuesday as investors balanced a tentative pause in hostilities between Israel and Iran against the prospect of stickier inflation and higher US interest rates.

Spot gold held near $4,332.50 an ounce in early trade, stabilising after touching its lowest level in more than two months in the previous session.

US gold futures for August delivery slipped 0.1% to $4,357.10, reflecting a market still caught between safe-haven demand and pressure from rising rate expectations.

The metal has struggled to extend gains even as geopolitical risk remains elevated.

A ceasefire between Israel and Iran has lowered immediate demand for defensive assets, but traders are not yet treating the truce as durable.

Any renewed escalation, particularly if it threatens energy flows or draws in regional proxies, could quickly revive demand for bullion.

Ceasefire uncertainty keeps haven demand alive

Iran and Israel said on Monday they had stopped attacks on each other after an appeal from US President Donald Trump.

Tehran, however, warned that it would resume hostilities if Israel continued strikes on Hezbollah in Lebanon, leaving investors cautious about declaring the crisis contained.

That uncertainty has prevented a deeper selloff in gold. While the easing in oil prices has reduced some of the inflation shock from the Middle East conflict, the broader risk backdrop remains fragile.

Traders are still watching whether shipping routes, energy supplies and regional alliances stabilise or deteriorate again.

For now, gold is behaving less like a one-way crisis trade and more like an asset waiting for confirmation.

A sustained ceasefire could reduce immediate haven flows, but a renewed spike in crude prices or a breakdown in talks would likely put geopolitical risk back at the centre of the trade.

Inflation data becomes the next trigger

The next major test is May’s US consumer price index, due on Wednesday.

Investors will use the data to judge whether the Federal Reserve has room to pause or whether resilient growth, strong hiring and higher energy costs force policymakers to keep policy tighter for longer.

Goldman Sachs now expects the Fed to keep interest rates unchanged through 2026 and delay rate cuts until 2027, citing stronger economic activity and jobs growth.

Markets are also turning more hawkish, with traders pricing in a more than 70% chance of a Fed rate increase by December, according to the CME FedWatch tool.

That shift is a headwind for gold. The metal pays no interest, making it less attractive when bond yields rise.

A stronger dollar also makes bullion more expensive for buyers using other currencies, adding another layer of pressure.

Still, the longer-term bullish case has not disappeared.

Central banks have remained important buyers, and gold’s role as a hedge against currency risk, sovereign debt concerns and geopolitical shocks continues to support the market.

Other precious metals soften

Waterer said a return to $5,500 by year-end remained possible, supported partly by central bank demand.

But such a move would likely require oil prices, bond yields and the dollar to turn lower at the same time.

Elsewhere in precious metals, spot silver fell 0.7% to $67.71 an ounce, platinum slipped 0.2% to $1,751.39, while palladium rose 0.8% to $1,213.89.