NEW YORK — Spot gold settled at $4,369.57 an ounce Tuesday, declining 0.4 percent after earlier reaching a two-month high of $4,434.84 on June 5. U.S. gold futures rose 0.2 percent to $4,430.20.
Traders are pricing a nearly 50 percent chance of a Federal Reserve rate hike in September, up from 44 percent Monday, according to CME FedWatch data.
Markets await U.S. consumer price data Wednesday and producer price data Thursday. Both reports will offer further guidance on the Fed's policy path under Chair Kevin Warsh.
Hamad Hussain, a climate and commodities economist at Capital Economics, said a hotter-than-expected inflation print could justify a rate hike at the next Fed meeting — a move that would pressure gold prices lower.
Gold offers no yield, making it less attractive when Treasury yields rise. Higher rates increase the opportunity cost of holding the metal relative to fixed-income assets.
Cleveland Fed President Beth Hammack said Monday the time was right to begin raising interest rates gradually, citing the need to avoid sharper increases later — a hawkish signal from within the central bank.
Geopolitical uncertainty also weighed on sentiment. President Donald Trump responded to Iran's conditions for a peace deal by demanding compensation for people killed in wars, attacks and protests, adding uncertainty over efforts to reopen the Strait of Hormuz.
Saxo Bank analyst Ole Hansen said structural demand was limiting the correction in precious metals, with tentative signs of Western investors returning to the market.
Other precious metals declined. Spot silver fell 1.5 percent to $64.73. Platinum lost 0.7 percent to $1,740.06. Palladium dropped 1.4 percent to $1,363.42.
A rising probability of a September hike is already pushing shorter-duration Treasury yields higher. If long-term inflation expectations stay contained, the move flattens the yield curve — raising duration risk for bond portfolios carrying lower-yielding instruments bought before this repricing.
