Gold prices continued to weaken on Tuesday, hovering near multi-week lows as investor risk appetite improved following announcements of a ceasefire between Iran and Israel, and as expectations for the Federal Reserve rate cut in July gained traction.
By 3:20 pm AEST (5:20 am GMT), spot gold was down $28.51, or 0.9%, at US$3,340.69 per ounce.
The shift in sentiment followed a ceasefire declaration from United States President Donald Trump, later echoed by Iran’s Foreign Minister Abbas Araghchi. The easing of geopolitical tensions dampened safe-haven demand, contributing to gold’s decline.
However, some support for gold emerged at lower levels, as the ceasefire also reduced demand for the U.S. dollar, traditionally gold’s main competitor during periods of market stress.
Meanwhile, speculation is mounting that the Federal Reserve could begin easing monetary policy as early as next month. Fed Governor Michelle Bowman noted during a speech on Monday that “should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labour market”.
Her remarks followed similar comments by Fed Governor Christopher Waller last Friday, who noted that the central bank could be in a position to reduce the policy rate in July.
According to CME Group FedWatch Tool, the probability of a July rate cut has climbed to 22.7%, up from 14.5% at the end of last week.
Investors are now awaiting fresh signals from Fed Chair Jerome Powell, who begins a two-day congressional testimony Tuesday, which may offer clearer insight into the central bank’s policy outlook.
Meanwhile, markets are still closely monitoring developments in the Middle East. Despite the ceasefire, the Israeli military has reported continued ballistic missile launches from Iran, raising the risk that renewed escalation could reignite safe-haven flows and lift gold.
