Spot Gold dropped more than 0.5% on Tuesday, reversing gains from the prior trading day, as market players continued to weigh situation in the Middle East ahead of the US CPI data.
Fresh negative developments around the Middle East conflict have reduced hopes for a US-Iran peace agreement and bolstered demand for the US Dollar as a reserve asset.
A firmer dollar makes dollar-priced Gold less appealing to international investors holding other currencies.
US President Donald Trump dismissed Iran’s proposal to end a more than two-month-old conflict amid disagreements over Tehran’s nuclear program and a standoff over the critical Strait of Hormuz.
CNN reported that Trump had grown impatient with the continued closure of the strategic waterway and also frustrated with how the Iranians are handling negotiations to end hostilities. In addition, Trump aides said that he was now more seriously considering a resumption of major combat operations than he had in recent weeks.
Market players now braced for the key US CPI inflation report later in the day, which may provide fresh clues over price trends and the Fed’s policy path.
“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,” Ilya Spivak, head of global macro at Tastylive, was quoted as saying by Reuters.
“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.”
Brent prices held above $100 per barrel, as the Strait of Hormuz remained closed, leading to tight energy supplies.
Elevated energy costs have added to global inflation expectations and kept central bank policy makers wary of adopting a more dovish stance. In turn, the reduced probability of near-term interest rate cuts by central banks has weighed on Gold, which pays no interest.
Goldman Sachs now projects Federal Reserve interest rate cuts in December 2026 and March 2027, compared to a prior forecast of September and December.
Spot Gold was last down 0.67% on the day to trade at $4,703.58 per troy ounce.





