Gold rebounds above $4,000 as traders brace for a decisive inflation test

Gold rose on Tuesday after briefly touching a two-week low, as investors avoided large bets before US inflation data and Federal Reserve Chair Kevin Warsh’s congressional testimony.

Spot gold gained 0.3% to $4,013.93 an ounce by 0300 GMT after falling to its weakest level since July 1. US futures for August delivery advanced 0.4% to $4,020.80.

The modest recovery followed a near-3% slide on Monday, when bullion recorded its sharpest one-day decline in more than a month.

Oil shock complicates gold’s haven appeal

The renewed conflict between the US and Iran has presented an unusual test for gold.

Geopolitical stress would normally support demand for defensive assets, but its more immediate effect has been a jump in oil prices and renewed concern about inflation.

Brent crude surged almost 10% on Monday and remained above $84 a barrel during Asian trading on Tuesday.

Higher energy costs could reverse some of the recent improvement in headline inflation and keep the Fed focused on price pressures.

That matters for bullion because rising policy rates and bond yields increase the opportunity cost of holding an asset that pays no interest.

The World Gold Council has also cautioned that geopolitical turmoil does not always lift gold when higher yields and a stronger dollar dominate investor positioning.

Dollar and yields remain the key pressure points

Gold’s rebound remained fragile as investors weighed the prospect of higher Treasury yields and a firmer dollar.

Both tend to reduce demand for bullion by increasing the relative appeal of interest-bearing assets.

Markets have raised expectations for another US rate increase after Fed Governor Christopher Waller warned that policy may need to tighten if inflation remains well above the central bank’s 2% target.

The June consumer-price report will therefore be closely watched for signs that underlying price pressures are proving persistent.

Producer-price data and Fed Chair Kevin Warsh’s testimony later in the week could also influence expectations for the pace and timing of future policy moves.

Rate-hike bets limit the rebound

Traders have sharply increased expectations for a September move. CME FedWatch indicated a roughly three-in-four chance of a quarter-point increase, compared with about 57% a week earlier.

Analysts said investors were reluctant to commit before the CPI report and Warsh’s testimony, with developments in the Middle East adding another layer of uncertainty.

The broader precious-metals market remained subdued.

Silver slipped 0.1% to $57.60 an ounce after touching a two-week low. Platinum fell 0.5% to $1,597.52, while palladium gained 0.6% to $1,254.82.

Gold’s next move is likely to depend less on geopolitical headlines alone and more on whether those tensions translate into another sustained rise in inflation, yields and the dollar.