Gold price (XAU/USD) rebounded to nearly $4,440 during the early Asian session on Tuesday, recovering from a 2026 low near $4,100. This recovery followed US President Donald Trump's decision to back down from his threat to destroy Iran’s power infrastructure, which reduced immediate inflation fears and eased geopolitical tensions in the Middle East [1]. Bloomberg reported that Trump offered Iran a five-day reprieve, signaling potential new talks with Tehran that could resolve the conflict. The reversal came after Trump had previously given Iran until Monday evening New York time to reopen the Strait of Hormuz [1].
Market strategists told CNBC that the prospect of higher interest rates as a result of the war could boost government bonds among investors, at the expense of non-yielding precious metals like gold [1]. Traders are closely monitoring the situation, as any signs of rising tensions between the US and Iran could fuel concerns over inflation and rising energy prices, potentially exerting selling pressure on gold [1].
China’s official gold reserves have reached a record 2,309 tonnes, following a 16-month consecutive buying streak by the People's Bank of China (PBoC). Higher demand from China, the world's largest precious metal producer, could lift gold prices further [1]. Central banks added 1,136 tonnes of gold worth around $70 billion to their reserves in 2022, marking the highest yearly purchase since records began, with emerging economies such as China, India, and Turkey quickly increasing their gold reserves [1].
Gold is widely seen as a safe-haven asset and a hedge against inflation and depreciating currencies. It has an inverse correlation with the US Dollar and US Treasuries, and tends to rise when the Dollar depreciates or when risk assets sell off [1].
CONCLUSION
Gold prices have rebounded sharply amid easing tensions in the Middle East and record demand from China. While the market remains sensitive to geopolitical developments, central bank buying and gold's safe-haven status continue to support its value. Investors are advised to monitor US-Iran relations and Chinese demand for further market direction.