Gold prices held just above the key US$5,000 level in early Asian trade on Tuesday, consolidating around monthly lows as investors turned their attention to the upcoming United States Federal Reserve policy decision.
By 3:25 pm AEDT (4:25 am GMT), spot gold was trading 0.5% higher at US$5,029.29 per ounce.
The precious metal continues to face headwinds from renewed strength in the U.S. dollar and growing expectations that the Federal Reserve may maintain a hawkish stance at its policy meeting on Wednesday.
Safe-haven demand for the greenback has strengthened as geopolitical tensions in the Middle East persist, particularly with fading hopes for a reopening of the Strait of Hormuz, a critical global energy transit route.
On the ground, tensions remained elevated. The Israel Defense Forces (IDF) said on Tuesday that they “identified missiles launched from Iran toward the territory of the State of Israel. Defensive systems are operating to intercept the threat”.
At the same time, Iran’s Foreign Minister dismissed reports of direct communication with U.S. envoy Steve Witkoff, dampening expectations for near-term ceasefire negotiations.
Broader market concerns also remain centred on energy supply disruptions. European nations have declined to send warships to escort vessels through the Strait of Hormuz, despite warnings from U.S. President Donald Trump that NATO faces “a very bad future” if members fail to assist in reopening the vital shipping route.
These developments have supported demand for the U.S. dollar as a safe-haven asset, limiting upside potential for gold.
In addition, expectations for U.S. monetary policy have shifted in favour of higher-for-longer interest rates.
Markets are increasingly pricing in that the Federal Reserve will keep rates unchanged over the next three meetings, reducing the appeal of non-yielding assets such as gold.
