Gold prices (XAU/USD) recovered to near $4,660 during the early Asian session on Tuesday, as traders closely monitored US President Donald Trump's deadline for potential military strikes on Iranian infrastructure following the closure of the Strait of Hormuz [1]. Trump stated on Monday that the latest US ceasefire proposal with Iran was 'not good enough,' and reiterated his threat to attack Iran’s energy and transportation infrastructure if the strait is not reopened by Tuesday at 8 p.m. ET [1].
The closure of the Strait of Hormuz has led to rising crude oil prices due to supply concerns, which could increase inflationary pressures [1]. This development may shift expectations regarding Federal Reserve (Fed) rate cuts and weigh on non-yielding assets like gold, which is typically favored during periods of geopolitical uncertainty but becomes less attractive when interest rates are high [1].
Market data from the CME FedWatch tool indicated that futures pointed to virtually no chance of a move at the April 28-29 Federal Open Market Committee (FOMC) meeting, with a 77.5% probability that the Fed will remain on hold through the end of the year [1].
Gold is widely regarded as a safe-haven asset and a hedge against inflation, especially during turbulent times. Central banks, particularly from emerging economies such as China, India, and Turkey, have been increasing their gold reserves, with central banks adding 1,136 tonnes of gold worth around $70 billion to their reserves in 2022, marking the highest yearly purchase since records began [1].
CONCLUSION
Gold prices have rebounded as geopolitical tensions escalate, driven by President Trump's deadline for Iran to reopen the Strait of Hormuz. Rising oil prices and inflation concerns are influencing market expectations for Fed policy, with traders anticipating no rate cuts in the near term. The safe-haven appeal of gold remains strong amid uncertainty, but its attractiveness may be tempered if interest rates stay elevated.