Gold steadies near seven-week low as investors await US data

Gold held near a seven-week low on Tuesday as investors weighed the prospect that the Federal Reserve keeps interest rates higher for longer and awaited a run of US economic data. Spot gold was little changed at $4,124.57 per ounce as of 0140 GMT, having hit its lowest level since August 5 in the previous session. US gold futures fell 0.3% to $4,156.70.

Christopher Tahir, senior market strategist at Exness, said geopolitical developments would remain crucial for gold, as continued tensions could keep energy prices and yields elevated, while meaningful progress towards de-escalation could ease pressure. US and Iranian officials spoke separately with mediators as part of a renewed effort to end seven months of war, according to officials of both countries. Oil prices rose for a second successive session amid lingering concern over Middle East supply disruption.

Elevated oil prices can feed inflation by raising costs across the economy, potentially prompting central banks to raise rates to keep price pressures in check. Despite its reputation as an inflation hedge, gold tends to struggle in a high-rate environment as investors favour assets that generate returns. Markets currently see a 70.3% probability of a Fed rate hike in October, according to the CME's FedWatch Tool.

Fed Governor Lisa Cook said she expects continued inflationary pressure in coming months stemming from AI-related demand and higher oil prices, though she stopped short of saying more rate hikes will be needed. Investors are watching a series of US data due this week, including job openings, ADP employment, PCE figures and nonfarm payrolls, for fresh signals on monetary policy. Tahir added that persistent price pressures combined with resilient activity would reinforce expectations that central banks need to remain restrictive, keeping yields elevated and leaving gold vulnerable to further losses.

Among other metals, spot silver fell 0.6% to $60.62, platinum slipped 1% to $1,699.86 and palladium lost 0.5% to $1,209.08.