Gold extends rally as Fed signals patience and Iran tensions shift

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Gold extends rally

Highlights

Gold extended its two-day rally and traded around $4,560 an ounce.
Powell indicated that the Fed is not rushing to respond to the energy shock with higher rates, although inflation risks remain.
Additional support came from signals of possible de-escalation in the U.S.-Iran conflict, even without a quick reopening of the Strait of Hormuz.

Rates, inflation and gold response

According to Bloomberg, Powell indicated that the Federal Reserve does not view the sharp rise in energy prices as sufficient reason for an immediate tightening of policy. He said energy shocks are typically short-lived in nature, and that the Fed can afford to wait and see whether higher oil prices translate into a more persistent increase in inflation expectations. At the same time, Powell warned that inflation risks remain if disruptions to energy supplies drag on.

That more restrained tone became the main driver behind gold gains. The market interpreted the Fed chair remarks as a signal that another rate increase is not yet the base-case scenario. That matters for gold because the metal does not generate yield and typically benefits when expectations for higher interest rates begin to ease. Gold climbed to as high as $4,564.72 an ounce on Tuesday, with intraday gains exceeding 2% before part of the move was pared back.

Iran, the Strait of Hormuz and the geopolitical premium

A second factor came from a fresh round of signals out of the White House. According to MarketWatch, after reports that Trump was prepared to seek an end to the war with Iran even without the immediate reopening of the Strait of Hormuz, oil prices moved lower, but then the price of Brent crude rose by 0.5% to $113.30 per barrel. The market interpreted that as a sign of possible, though incomplete, de-escalation.

The broader picture, however, remains mixed. At the same time, the White House has maintained tough rhetoric toward Iran, while the conflict continues to threaten the region energy infrastructure and trade routes. That means part of the demand for gold is still being driven not only by rate expectations, but also by classic safe-haven buying amid military uncertainty.

What now drives the gold price

Gold is now effectively balancing between two forces. On one side, the softer reading of Powell comments is reducing pressure from US dollar interest rates and supporting prices. On the other, Middle East geopolitics remains unstable enough that any new strike on energy infrastructure or any breakdown in negotiations could quickly trigger another surge in oil and intensify inflation concerns.

Against that backdrop, the area around $4,560 an ounce reflects both processes at once: weaker expectations for an immediate Fed rate hike and continued demand for protection against military and inflation risks.

In addition, we wrote that Bitcoin holds near $67,700 on Iran de-escalation hopes.

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