Gold prices came under pressure on Tuesday after stronger-than-expected US inflation data and rising US Treasury yields boosted the US dollar and weakened demand for the precious metal. Gold traded near $4,705 after hitting a three-week high of $4,773 during the Asian session.
Data from the US Bureau of Labor Statistics showed that inflation in the United States accelerated in April, driven primarily by rising energy costs and oil prices amid tensions and disruptions related to the Strait of Hormuz. The annual inflation rate rose to 3.8% from 3.3% previously, while core inflation climbed to 2.8%, both exceeding market expectations.
This data reinforced expectations that the Federal Reserve System may keep interest rates high for longer, with the possibility of another rate hike later this year. High interest rates and bond yields typically negatively impact gold because it does not offer investors a return.
Meanwhile, tensions between the United States and Iran continued after Donald Trump described ceasefire efforts as being “on life support,” while rejecting the latest Iranian proposal, raising fears of a possible return to military escalation and tension in the Strait of Hormuz.
Technically, gold is still trading below its 100-day moving average near $4,785, while key support is seen around $4,500. Analysts believe a clear break above $4,850 will be necessary to restore strong upward momentum.