Gold rose above $4,040 an ounce on Tuesday as investors weighed tentative diplomatic efforts to halt the renewed US-Iran conflict against fresh threats to shipping in the Red Sea.
Spot bullion gained 0.9% to $4,042.69 by 0345 GMT, while August futures advanced 0.8% to $4,047.40.
The move followed gold’s recent struggle to hold the $4,000 threshold as surging oil prices revived fears of inflation and higher interest rates.
Tuesday’s rebound suggests traders were responding more to a possible easing of the energy shock than to conventional haven demand.
Crude prices softened as markets assessed reports that mediators had presented Tehran with a proposed 10-day ceasefire.
A senior Iranian official said the initiative was intended to revive last month’s interim agreement and create a path towards broader negotiations.
A sustained fall in oil would matter for gold because it could limit the inflationary pressure from disrupted Gulf supplies.
That, in turn, would reduce the urgency for the Federal Reserve to tighten policy further and lower the opportunity cost of holding an asset that pays no interest.
The Fed is widely expected to leave rates unchanged at its July 28-29 meeting.
CME FedWatch pricing cited on Tuesday nevertheless showed a 64% probability of an increase in September, leaving bullion sensitive to any renewed rise in crude, Treasury yields or the dollar.
Diplomacy remains fragile
The prospect of talks has not removed the geopolitical premium.
US and Iranian forces continued exchanging attacks, while Yemen’s Iran-backed Houthis threatened to block Saudi shipping through the Bab el-Mandeb strait.
That warning broadens the risk beyond the Strait of Hormuz.
The Red Sea route is a major channel for oil and container traffic, and any credible disruption could push freight, insurance and energy costs higher.
The mixed signals explain why gold’s advance remained measured rather than explosive.
Traders are balancing a possible ceasefire against the risk that another attack on shipping or energy infrastructure quickly reverses the decline in oil.
Tastylive strategist Ilya Spivak said bullion appeared to be building a base around $4,000, with scope to re-engage the upside if that support holds.
He also suggested that markets were becoming less reactive to each Middle East headline unless it materially changed energy flows or the inflation outlook.
A sustained break above $4,050 would strengthen the rebound and bring the recent highs around $4,100 back into view.
Failure to hold $4,000 would revive concerns that the broader correction is not finished.
Other precious metals also advanced. Silver jumped 2.2% to $57.67 an ounce, while platinum and palladium each gained 0.8%.