Gold hits two-month high: is the road to $5,000 opening again?

Gold climbed to its highest level in more than two months on Tuesday, extending a three-session rally as investors rebuilt safe-haven positions and prepared for US inflation data that could determine whether the Federal Reserve stays on hold in September.

Spot gold rose 1% to $4,432.74 an ounce by 2.17 am GMT, its strongest level since June 5, while US futures gained 1.7% to $4,492.60.

The rebound has carried bullion sharply away from the $4,000 area tested in July, helped by weaker US employment data, short-covering and another deterioration in US-Iran diplomacy.

Rate expectations give gold a second tailwind

The latest advance has been supported by the sharp change in expectations following Friday’s US employment report.

Weak July hiring reduced confidence that the Fed needs to raise rates again immediately, making non-yielding assets such as gold relatively more attractive.

The central bank kept its target range at 3.5% to 3.75% in July, although Beth Hammack, Neel Kashkari and Lorie Logan dissented in favour of a quarter-point increase.

That split makes this week’s inflation data unusually important. July consumer prices are due on Wednesday at 8.30 am ET, followed by producer prices on Thursday.

Forex.com analyst Fawad Razaqzada sees softer inflation as the clearest route to extending gold’s breakout.

His assessment is that evidence of cooling economic activity without another acceleration in prices would reduce pressure for tighter policy, potentially weighing on the dollar and supporting bullion.

A hotter CPI report would challenge that logic by pushing bond yields and rate expectations higher.

Buyers return after gold’s $4,000 correction

The speed of the rebound also suggests positioning is playing an increasingly important role.

IG analyst Tony Sycamore sees the move as a combination of investors returning after missing the decline towards $4,000, speculative short-covering and renewed demand for defensive assets.

He believes a sustained breakout could eventually reopen a path towards $5,000.

The broader demand picture offers some support to that argument.

The World Gold Council expects investment to remain the main source of demand growth through the rest of 2026, with Asian buying and over-the-counter activity becoming increasingly important.

Central banks are also expected to remain significant net buyers.

Still, the Council cautions that Western ETF demand remains sensitive to real yields, monetary-policy expectations and the dollar.

That leaves gold exposed if this week’s inflation numbers revive the case for higher rates.

Hormuz gives the rally a double-edged geopolitical boost

Geopolitical tension is providing another source of buying after US-Iran negotiations deteriorated.

President Donald Trump responded to Iran’s demands for compensation with demands of his own, complicating efforts to reach a broader settlement and restore normal shipping through the Strait of Hormuz.

The resulting oil rally creates an unusual problem for gold. Brent traded near $88 a barrel on Tuesday as expectations for a quick peace agreement faded.

Higher geopolitical risk can increase demand for bullion, but sustained gains in crude could also lift inflation expectations and make the Fed more willing to tighten policy.

Gold is therefore benefiting from two forces that could eventually collide.

Weak employment has reduced near-term rate pressure, while Middle East uncertainty has restored part of bullion’s safe-haven appeal.

But if Hormuz disruption keeps pushing energy prices higher, that same geopolitical premium could revive the inflation trade that hurt gold earlier this year.

Silver rose 0.9% to $66.30 an ounce, platinum gained 0.7% to $1,765.26 and palladium advanced 0.8% to $1,394.