Gold bulls run into a dollar wall as Fed anxiety returns

Gold’s latest retreat says more about the dollar than about fear.

Bullion slipped on Tuesday as traders moved back into the greenback, betting that the Federal Reserve may still have to raise interest rates this year to contain sticky inflation.

A calmer tone around US-Iran talks reduced some haven demand, while a rebound in oil kept the inflation debate alive.

For investors, that mix is awkward: gold still has geopolitical support, but higher yields and a stronger dollar are making it harder for the metal to extend this year’s rally.

Dollar strength takes the shine off gold

Spot gold fell 0.7% to $4,162.60 an ounce in early trading, after dropping nearly 1% earlier in the session.

August gold futures declined 0.5% to $4,180.50.

The pressure came mainly from the dollar, which held close to a one-year high.

A stronger US currency makes bullion more expensive for buyers using other currencies, often reducing demand outside the dollar market.

Analysts said that gold had briefly benefited from lower oil prices this week, but that support was being offset by the dollar’s rise and renewed expectations of Fed tightening.

Iran talks cool haven demand

Geopolitics remains part of the gold story, but it is not giving bulls the same lift as before.

Washington granted a 60-day sanctions waiver on Iran after the first round of talks under a tentative regional peace process, while officials reported a sustained pause in fighting in Lebanon.

US Vice President JD Vance said the discussions in Switzerland had created a foundation for a final agreement.

Tehran, however, pushed back on suggestions that nuclear issues were already being discussed.

That leaves markets in a halfway position. The risk of a wider Middle East shock has eased, but not disappeared.

Oil rebounded after Monday’s drop, reminding traders that any renewed disruption could quickly feed back into inflation expectations.

PCE data becomes the next test

The rate backdrop is now the bigger problem for gold.

Chicago Fed President Austan Goolsbee said the labour market looked stable, but the key question was whether high inflation would persist or fade as tariffs and Middle East tensions eased.

Markets have moved sharply in that direction. CME FedWatch showed traders assigning an 88% chance of a December rate increase, up from 61% before last week’s Fed meeting.

The next major signal will come from the personal consumption expenditures report, the Fed’s preferred inflation gauge, due later this week.

A hotter reading would strengthen the case for tighter policy and keep pressure on non-yielding assets such as gold.

Other precious metals also weakened. Silver fell 1.8% to $64.02 an ounce, platinum lost 1.6% to $1,651.79 and palladium slipped 0.7% to $1,256.27.