By: Economy Middle East

Gold prices recovered on Tuesday after falling to a two-week low earlier in the session, as investors turned their attention to key U.S. inflation data while weighing the impact of escalating tensions between the United States and Iran. The renewed geopolitical uncertainty pushed oil prices higher, reinforcing expectations that inflationary pressures could persist and prompting markets to reassess the outlook for U.S. interest rates.

Spot gold gained 0.58 percent to $4,021.97 per ounce by 9:23 UAE time after recovering from its weakest level since July 1. U.S. gold futures for August delivery also advanced 0.54 percent to $4,027.30 an ounce.

Gold rates in the UAE also edged higher across all major purities compared with the previous day. Twenty-four-carat gold increased by AED1.00 to AED484.50 per gram, while 22-carat rose by AED1.00 to AED448.75. Twenty-one-carat gold gained AED1.00 to AED430.25, 18-carat increased by AED0.75 to AED368.75, and 14-carat climbed AED0.75 to AED287.75.

Inflation in focus

The rebound followed a sharp decline in the previous session, when gold lost around 3 percent, marking its biggest daily percentage drop in more than a month. The sell-off came as continued fighting between the United States and Iran drove oil prices to their highest level in a month, raising concerns that higher energy costs could keep inflation elevated.

Although gold is widely regarded as a hedge against inflation and geopolitical uncertainty, higher interest rates generally reduce the appeal of the non-yielding precious metal by making interest-bearing assets more attractive. That relationship has kept investors cautious despite renewed safe-haven demand linked to the Middle East conflict.

Market participants are now awaiting the release of the June U.S. Consumer Price Index later on Tuesday for fresh signals on inflation and the Federal Reserve‘s next policy move. Producer Price Index data due later this week, together with Federal Reserve Chair Kevin Warsh’s first semi-annual testimony before Congress, are also expected to provide further insight into the outlook for monetary policy.

Rate hike bets

Expectations for tighter monetary policy strengthened after Federal Reserve Governor Christopher Waller said on Monday that interest rates may need to be raised in the near term if upcoming economic data show inflation continuing to run well above the central bank’s 2 percent target.

Those comments prompted traders to increase bets on a September interest rate hike. According to CME Group’s FedWatch Tool, the probability of another rate increase has climbed to around 76 percent, up from 57 percent just a week earlier, reflecting growing confidence that policymakers could maintain a restrictive stance if inflation remains persistent.

Other precious metals also recovered after early weakness. Spot silver rose 0.62 percent to $57.97 per ounce after touching a two-week low earlier in the session. Platinum gained 0.37 percent to $1,617.55 per ounce, while palladium advanced 1.30 percent to $1,250.00.

Gold awaits data

Gold has remained highly sensitive this year to changing expectations surrounding U.S. interest rates, inflation data and geopolitical developments. Markets have repeatedly adjusted pricing following shifts in Federal Reserve guidance and major economic releases, with stronger-than-expected inflation figures typically boosting Treasury yields and the U.S. dollar, both of which tend to weigh on bullion. Conversely, periods of heightened geopolitical uncertainty have continued to support demand for safe-haven assets, limiting downside pressure even during episodes of rising yields.

Investors have also closely monitored developments in energy markets because sustained increases in oil prices can feed into broader inflation, influencing central bank decisions. In recent months, comments from Federal Reserve officials have underscored that future policy decisions will remain data dependent, placing greater importance on inflation readings, labour market indicators and broader economic conditions. As a result, each major U.S. economic release has become a key catalyst for movements in gold and other precious metals, with traders balancing safe-haven demand against expectations for higher borrowing costs.