Gold price (XAU/USD) remains under selling pressure near $3,995 during the early Asian session on Tuesday. The precious metal extends its downside as renewed US-Iran tensions keep inflationary pressures high. Traders await the release of the US June Consumer Price Index (CPI) inflation report and Federal Reserve (Fed) Chair Kevin Warsh testifies later on Tuesday.
Bloomberg reported on Monday that US President Donald Trump reinstated the US blockade of Iranian ships transiting the Strait of Hormuz and demanded a 20% reimbursement on all other cargo shipped through the waterway. Trump added that the US would keep up attacks on Iran, saying that “we’re going to hit them very hard tonight, and we’re going to hit them hard tomorrow.”
A reinstatement of the blockade on Iranian ports may prompt Tehran to step up attacks on ships seeking to transit the Strait of Hormuz. This, in turn, could trigger energy-driven inflation concerns and force the Fed to maintain its higher-for-longer rate stance. 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.
The US CPI inflation data will be in the spotlight later in the day. Analysts expect the headline CPI to decline by 0.1% MoM in June, while the core CPI is projected to show a rise of 0.3% during the same period. In case of a softer-than-expected outcome, this could weigh on the US Dollar (USD) and support the USD-denominated commodity price in the near term.
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