Gold Rises as Investors Weigh Hormuz Deadline and Fed Policy Outlook

Gold Gains on Geopolitical Tensions and Inflation Concerns

Spot gold rose 0.6% to $4,674.89 per ounce on Tuesday, while U.S. gold futures for June delivery increased 0.4% to $4,702.20. The moves came as market participants remained cautious ahead of a deadline set by U.S. President Donald Trump for reopening the Strait of Hormuz, a key flashpoint in the Iran war.

Iran stated on Monday that it sought a lasting end to the war with the U.S. and Israel and resisted pressure to reopen the strategic waterway. Trump warned that Iran could be “taken out” if it failed to reach a deal by his Tuesday night deadline. According to Ilya Spivak, head of global macro at Tastylive, “everyone is in a mode where we're waiting for whatever the outcome is of this diatribe that the President has been on for the past several days.”

Oil prices extended gains and held above $110 a barrel as Trump escalated his rhetoric against Iran. The surge in oil has added to inflation concerns, a factor that typically supports gold as a perceived hedge during periods of price pressure.

Fed Policy Expectations Temper Bullish Gold Outlook

While inflation dynamics are supportive for gold, higher interest rates tend to reduce its appeal as a non-yielding asset. Cleveland Fed President Beth Hammack and Chicago Fed President Austan Goolsbee both indicated that inflation is a far more pressing concern than employment, reinforcing their backing for maintaining tighter monetary policy.

Market pricing, as reflected in CME’s FedWatch tool, shows investors see no chance of a Federal Reserve rate cut this year. Attention now turns to the minutes of the Fed’s March policy meeting, due Wednesday, along with upcoming U.S. inflation data, including PCE and CPI releases later in the week.

Spivak noted that in the prior year gold “went off on its own and became its own speculative narrative,” and suggested this pattern is likely to re-emerge. He added that by the end of the year, prices could potentially be “closer to $5,500 and $6,000,” framing a more bullish scenario contingent on evolving market conditions.

FAQ

Why did gold prices rise on Tuesday?
Gold prices rose as investors reacted to heightened geopolitical tensions over the Strait of Hormuz and to rising oil prices, which have intensified inflation concerns.

How are oil prices influencing gold?
Oil prices above $110 a barrel are fueling worries about higher inflation, which tends to support demand for gold as a store of value, even as higher interest rates weigh on the metal.

What is the current market view on Federal Reserve rate cuts?
According to CME’s FedWatch tool, markets currently see no chance of a Federal Reserve rate cut this year, reflecting expectations for continued tight monetary policy.

What gold price levels have been mentioned by analysts?
Ilya Spivak of Tastylive suggested that, if current dynamics persist, gold could end the year closer to a range between $5,500 and $6,000 per ounce.