Gold slips as markets assess Mideast tensions ahead of US inflation data

Gold prices fell on Tuesday, as markets weighed developments in the Middle East conflict and interest rate expectations ahead of key U.S. inflation data.

Spot gold fell 0.6% at $4,705.99 per ounce by 0603 GMT, after climbing to a three-week high earlier in the session.

U.S. gold futures for June delivery lost 0.3% to $4,714.50.

Hopes for a peace deal on Iran faded after U.S. President Donald Trump said a ceasefire with Iran was “on life support” as Tehran rejected a U.S. proposal to end the conflict and stuck to a list of demands the U.S. president described as “garbage”.

“We’ve already seen expectations for a lot of central banks shift in a much more hawkish direction, and for the Federal Reserve, it’s meant a dropping of all rate cut possibilities for this year,” said Ilya Spivak, head of global macro at Tastylive.

“We’re really looking to what the CPI (Consumer Price Index) numbers might give, and if there is a stronger inflationary impetus there than already expected.”

The data is expected later in the day and could give investors clues into the Fed’s future monetary policy path.

Meanwhile, oil prices rose and the dollar extended gains from the previous session.

Elevated crude oil prices can stoke inflation, increasing the likelihood of higher interest rates. While gold is seen as a hedge against inflation, high rates tend to weigh on the non-yielding asset.

BofA Global Research and Goldman Sachs scaled back expectations of U.S. interest rate cuts this year, citing elevated inflation due to high energy prices and growing strength in the labour market.

Markets are also watching Trump’s two-day visit to China this week, during which he is set to meet Chinese President Xi Jinping to discuss a wide variety of topics, including the Middle East.

Spot silver fell 1.3% at $84.98 per ounce, platinum slid 2.3% to $2,083.47, and palladium was down 1.8% at $1,482.19.