Gold rises above $4,000 as traders track Middle East tensions, Fed rate outlook

Gold  |  2026-07-21 00:18:30   |   By

Gold traded above the $4,000 level after ending the previous session 0.2% lower, with investors balancing renewed geopolitical risks against concerns that higher oil prices could keep inflation elevated and reinforce expectations that the Federal Reserve will keep interest rates higher for longer.

SEATTLE (Scrap Monster): Gold prices edged higher on Monday, reclaiming the psychologically important $4,000-an-ounce level as investors monitored rapidly evolving developments in the Middle East while assessing whether higher energy prices could complicate the Federal Reserve's inflation outlook.

At 21:43 ET (01:43 GMT), XAU/USD rose 0.4% to $4,024.72 an ounce, while Gold Futures gained 0.5% to $4,029.87. XAG/USD climbed 0.9% to $56.93 an ounce, while XPT/USD slipped 0.2% to $1,594.30.

Middle East developments keep energy markets on edge

Gold traded above the $4,000 level after ending the previous session 0.2% lower, with investors balancing renewed geopolitical risks against concerns that higher oil prices could keep inflation elevated and reinforce expectations that the Federal Reserve will keep interest rates higher for longer.

Oil prices were little changed after two sessions of gains despite fresh U.S. strikes on Iranian targets and President Donald Trump's warning that Tehran 'will pay' following the deaths of three U.S. soldiers in recent days.

Adding to regional uncertainty, Yemen's Iran-backed Houthi movement threatened to impose a maritime blockade on Saudi Arabia, prompting the kingdom-led military coalition to step up measures to protect shipping through the Red Sea.

At the same time, markets found some relief after Iran said mediators were discussing proposals to de-escalate the conflict, while Reuters reported a plan for a 10-day halt in strikes, tempering fears of an immediate escalation.

The conflict, now in its fifth month, continues to drive up energy and other commodity prices, leaving investors to weigh the inflationary impact of higher oil prices against recent signs of softer U.S. economic activity.

Fed meeting in focus as markets weigh inflation risks

The Federal Reserve is widely expected to leave interest rates unchanged at next week's policy meeting, but investors will be watching policymakers' guidance closely for clues on how rising energy prices could influence the inflation outlook.

Swap markets continue to price in at least one interest-rate increase by year-end, even as recent U.S. economic data have pointed to moderating growth.

Afdhal Rahman, Executive Director, Wealth Advisory at OCBC, said gold's strong rally has run into a more challenging macro backdrop as higher real yields, a stronger U.S. dollar and hawkish repricing of interest-rate expectations have weighed on investor demand.

He added that renewed tensions in the Gulf could keep oil prices, inflation expectations and the U.S. dollar volatile in the near term, leaving gold under pressure until expectations for tighter monetary policy begin to ease, although sustained central bank buying should continue to provide longer-term support for bullion.

Gold has traded in a relatively narrow range around the $4,000-an-ounce mark in recent weeks after tumbling 14% in the second quarter, its weakest quarterly performance since 2013. 

Courtesy: www.investing.com