WORLD — Gold prices retreated on Tuesday as higher energy costs and renewed geopolitical uncertainty weighed on the precious metal’s efforts to recover from its lowest level in a year.
Spot gold dropped 1% to $3,908.49 per ounce by 0830 GMT. Meanwhile, US gold futures for December delivery declined 1.3% to $3,917.90.
The losses came after gold recorded gains of more than 2% on Monday, recovering from a one-year low reached on Friday.
Rising oil prices were a major factor behind Tuesday’s decline. Reports that the United States had attacked Iran’s Qeshm Island pushed oil prices up by more than $1, reigniting concerns over a potential escalation of the eight-month conflict and extended disruptions to energy supplies across the Middle East.
Increasing oil prices can fuel inflation by raising transportation, manufacturing and production expenses. The development has added uncertainty to financial markets, particularly as central banks weigh the possibility of additional interest-rate increases.
Higher borrowing costs and interest rates generally create challenges for gold because the precious metal does not offer interest payments. As a result, investors may favor interest-bearing assets when yields rise.
Data from CME’s FedWatch tool showed that traders were assigning a 75% probability to a Federal Reserve interest-rate increase in December.
Tim Waterer, chief market analyst at KCM Trade, said gold’s recovery was facing resistance as geopolitical risk premiums returned to oil markets.
He noted that gold would probably need to break decisively above $4,000 to establish a more sustainable recovery.
Investors were also paying attention to political developments in the United States as midterm elections began on Tuesday.
Waterer said a Democratic victory in both chambers of Congress could introduce further obstacles for artificial intelligence data-center projects and technology stocks. Any resulting weakness in technology investments could also weigh on gold if investors sell their holdings to offset losses in other assets.
Separately, the World Gold Council adjusted its outlook for investment demand this year. The organization lowered its projected growth in gold investment demand to 200 metric tons, down from its earlier estimate of 400 metric tons, pointing to reduced interest in gold bars and coins.
However, it raised its estimate for central-bank gold purchases, highlighting the continuing importance of institutional buying in the market.
Other precious metals also moved lower during the session. Spot silver lost 3.2% to $49.00 per ounce, while platinum declined 1.6% to $1,425.50. Palladium also fell 3.2% to $938.50.
Gold’s near-term performance will continue to depend on developments in oil markets, inflation pressures, Federal Reserve interest-rate decisions and political uncertainty surrounding the United States.
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