Gold traded near $4,060 an ounce on Tuesday, locked in a $4,007-to-$4,157 band for the better part of two weeks as safe-haven demand and rising rate-hike odds pull the metal in opposite directions. Central banks kept buying through gold's 27.5% drop from January's record even as Western funds kept selling, while a collapse in oil prices stripped away part of the metal's haven bid.
Gold traded near $4,060 an ounce on Tuesday, with the December futures contract running as high as $4,142.20 intraday for a 1.26% gain. Spot settled Monday at $4,054, up 0.27%. The metal has stayed in a $4,007-to-$4,157 band for the better part of two weeks, caught between haven demand tied to the Strait of Hormuz standoff and firm yields tied to a tightening-leaning central bank.
July brought a 0.5% monthly gain, the first increase since February. Gold remains down 6.34% year to date, though up 20.78% over twelve months. The metal now sits roughly 27.5% below the all-time high of $5,602.23 it printed on January 29, 2026.
The Fed Is Driving the Trade
The federal funds target sits at 3.50% to 3.75% after a fifth consecutive hold on July 29, a 9-to-3 vote with three dissents favoring a quarter-point hike. Futures now price a 68% probability of a hike at the September 15-16 meeting, up from 57% before the July decision. Annual U.S. inflation reached 4.20% in May 2026, the highest since April 2023, driven largely by the energy shock tied to the Middle East conflict.
Gold's traditional response to rising inflation would be to rally; instead the metal has stalled because the market is pricing the policy response rather than the inflation itself. One threshold still favors the metal: the 10-year inflation-protected yield remains beneath 2.5%, a level historically tied to sustained physical demand.
Oil's Collapse Cuts the Haven Bid
Washington called off a planned large-scale strike on Iran over the weekend to pursue an agreement on reopening the Strait of Hormuz, and crude collapsed on the news. West Texas Intermediate fell 5.56% to $79.96 on Monday and dropped another 4.2% to $76.99 on Tuesday, taking roughly 10% off the benchmark in two sessions.
Falling oil removes both the inflation impulse and the crisis premium that support gold. But nothing has actually been resolved: Tehran disputed that direct talks were underway while acknowledging progress in discussions conducted through Oman, and fresh reports of attacks near the strait surfaced in Tuesday's premarket.
Central Banks Keep Buying, Funds Keep Selling
Official-sector demand reached 289 tonnes in the second quarter, a 62% increase year over year and the strongest second-quarter central bank buying on record. Poland added 51 tonnes and China's central bank purchased 33 tonnes.
Western funds pulled the other way. North American gold-backed exchange-traded funds shed 45 tonnes in the second quarter and 61 tonnes across the first half, their weakest first half since 2013. Roughly 298 tonnes held inside those funds is now underwater at prices around $4,000, up from 270 tonnes when the metal traded above $4,250 — traders waiting to exit near flat rather than add to positions.
Source: Commodities Analysis & Opinion
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