Gold (XAU/USD) retreated from a three-week high during the Asian session on Tuesday as traders awaited the release of the latest US Consumer Price Index (CPI) figures, which are expected to influence the next directional move for the precious metal. The pullback in gold was attributed to negative headlines surrounding the Middle East crisis, specifically the ongoing conflict between the United States and Iran. US President Donald Trump dismissed Iran’s proposal to end the conflict, and according to CNN, has grown impatient with the closure of the Strait of Hormuz and frustrated with Iran's handling of negotiations. Some Trump aides indicated he is now more seriously considering a resumption of major combat operations, sparking fears of further escalation and supporting the US Dollar's reserve currency status, which in turn exerted downward pressure on gold prices [1].
Silver (XAG/USD), meanwhile, maintained its week-long rally, trading firmly near a two-month high of $86.50 during the Asian session. The white metal's resilience came even as oil prices remained broadly stable amid fears that military actions between the US and Iran could resume. The potential for renewed conflict and a prolonged closure of the Strait of Hormuz, a critical passage for nearly 20% of global energy supply, has heightened inflation expectations. Higher oil prices are generally negative for non-yielding assets like silver, as they boost global inflation expectations and discourage central banks from easing monetary policy [2].
Market participants are closely watching the upcoming US CPI data for April, scheduled for release at 12:30 GMT. The report is expected to show headline inflation rising to 3.7% year-on-year from the previous reading of 3.3% [2]. Traders are currently pricing in about a 25% chance that the US Federal Reserve will hike interest rates by the end of the year, reflecting concerns that war-driven energy price surges could rekindle inflationary pressures [1]. This has contributed to a modest uptick in the US Dollar and capped gains in gold, while silver continues to benefit from underlying demand and a constructive technical setup [1][2].
From a technical perspective, gold showed resilience below the 100-period Simple Moving Average on the 4-hour chart, with momentum indicators suggesting moderate bullish momentum. Silver, trading above its 20-day Exponential Moving Average at around $77.90, displayed strong upside momentum with the Relative Strength Index near 67, indicating that the rally is not yet exhausted. The next major trigger for silver and global markets is the anticipated bilateral meeting between US President Donald Trump and Chinese leader Xi Jinping, expected during May 13-15 [2].
CONCLUSION
Both gold and silver prices are being shaped by heightened geopolitical tensions in the Middle East and anticipation of key US inflation data. While gold has pulled back from recent highs due to a stronger US Dollar and hawkish Fed expectations, silver remains buoyant amid strong technical demand. The upcoming US CPI release and potential developments in US-Iran and US-China relations are likely to drive further market moves.