Gold Rebounds to $4,112 as Soft US CPI Eases Fed Hike Fears
Gold and silver prices surged on Tuesday after a sharp drop in US consumer prices reduced the likelihood of aggressive Federal Reserve rate hikes, offsetting earlier safe-haven selling driven by Middle East tensions.
Comex gold futures climbed $107 per troy ounce to an intraday high of $4,112 on Tuesday, fully reversing the previous session's losses. Comex silver futures rose $2 to touch $60, recovering from a prior $2.20 drop that reflected widespread risk aversion.
The rally was primarily driven by a significantly softer-than-expected US inflation print. The Consumer Price Index fell 0.4% on a seasonally adjusted basis in June, marking the largest monthly decline in more than six years. The annual inflation rate dropped to 3.5%, falling short of the median street estimate of 3.8%.
This data immediately recalibrated monetary policy expectations across global markets. Traders still price in a September rate hike by the US Federal Reserve, but the probability dropped to 63% from over 75% just a day earlier, according to the CME FedWatch Tool. Because precious metals do not offer any yield, they are highly sensitive to interest rate trajectories. The US dollar index slipped more than 0.5% to around 100.7, providing additional support for dollar-denominated metals.
Geopolitical risks ease
The inflation data was compounded by a de-escalation in Middle East shipping risks. US President Donald Trump abandoned a proposed 20% protection fee on ships transiting the Strait of Hormuz. "I have decided to replace the 20% United States Reimbursement Fee with Trade and Investment Deals that the various Gulf States will be making into the United States," Trump said in a social media post.
The Strait of Hormuz has been the epicentre of confrontation between the US and Iran since late February. The waterway accounts for nearly 25% of global crude oil exports and is a critical supply line for Asian energy markets. Iran's military reiterated it would not allow US interference in the strait and warned neighboring Gulf states against cooperating with Washington.
Trump's reversal helped trigger a sharp decline in crude oil prices. Rising energy costs had previously fueled concerns about persistent inflation and multiple Fed rate hikes this year. The simultaneous drop in oil prices and rate hike odds created a favorable environment for precious metals.
Asian markets follow suit
The move in international benchmarks rippled through Asian trading. India's near-month MCX gold futures jumped nearly ₹3,000 per 10 grams to hit an intraday high of ₹1,43,194. This entirely recovered a steep ₹5,000 plunge from the previous session that had pushed the contract to a three-month low.
MCX silver futures also rallied, rising ₹7,710 per kg to touch an intraday high of ₹2,25,428. However, the white metal's broader trend remains under pressure; it is still down ₹5,643 for the month of July following a severe ₹38,435 per kg decline at the end of June.
