Gold Edges Lower Below $4,350 As Fed Rate Hike Expectations Grow

Gold price (XAU/USD) trades with mild losses around $4,325 during the early Asian session on Tuesday. The precious metal remains on the defensive near its lowest since March 24 amid uncertainty in the Middle East and rising bets of a US interest rate hike. 

Bloomberg reported on Monday that Iran and Israel agreed to ease strikes against each other after a flare-up in violence threatened to derail peace negotiations and led US President Donald Trump to appeal for de-escalation.

Iran had earlier announced an end to its military operations against Israel. However, its central military command warned that if Israel continued to attack, including in southern Lebanon, “much harsher and more crushing actions than before will be on the way." 

Traders will closely monitor the developments surrounding the Middle East situation. Rising tensions in the region continue to fuel concerns over inflation and expectations of elevated interest rates. 

Furthermore, strong US jobs data boosted expectations of a Federal Reserve (Fed) rate hike. It’s worth noting that Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high. 

Traders are now pricing in a 43% probability of a quarter-point rate hike in December, up from just about 14% a month ago, according to the CME FedWatch tool. Traders brace for the US Consumer Price Index (CPI) data on Wednesday and the Producer Price Index (PPI) data on Thursday for more clues on the Fed's interest rate path.