Gold prices rebounded above $4,160 an ounce on Tuesday after having dropped to a more than seven-week low in the previous session, as investors awaited new US economic data for guidance on the Federal Reserve’s interest-rate path. Bullion had slumped nearly 4% on Monday after a sharp rise in crude oil prices—fueled by persistent worries over potential disruptions to Middle East supply—reinforced expectations that the Fed may raise rates.
Higher oil prices can amplify inflationary pressures, increasing the likelihood that central banks will keep borrowing costs elevated for longer and thereby weighing on non-yielding assets such as gold. According to the CME FedWatch Tool, markets are now pricing in nearly a 70% chance of a Fed rate hike as early as October and a 95% probability of another increase in December. Attention is turning to Wednesday’s ADP employment report, PCE inflation data, and remarks from Fed officials for further signals on the monetary policy outlook.
