Gold (XAU/USD) traded in a narrow range during the Asian session on Tuesday, struggling to build on its late recovery from the $4,267-$4,268 region, which marked its lowest level since March 23. The precious metal's price movement was influenced by the US Dollar's retreat from a two-month high following Iran and Israel's announcement that they had halted attacks after an appeal from US President Donald Trump. This development provided a tailwind for gold, but traders remained cautious, awaiting further progress in the broader Middle East conflict and upcoming US inflation data releases [1].
Despite the ceasefire, diplomatic engagement between the US and Iran remains deadlocked, with major disagreements over Tehran's nuclear program and demands for international recognition, control over maritime traffic, lifting of sanctions, and release of frozen assets. Shipping traffic through the Strait of Hormuz remains severely constrained, keeping energy markets volatile and fueling inflationary concerns. These factors, combined with expectations for more hawkish central banks, including the US Federal Reserve, have led investors to assign more than a 70% chance of a Fed rate hike by year-end, according to the CME Group's FedWatch Tool [1].
The Swiss Franc (USD/CHF) also steadied, trading around 0.7970 during the Asian hours on Tuesday. The pair depreciated alongside the US Dollar following the Iran-Israel ceasefire, which injected optimism into global markets. However, Israeli Prime Minister Benjamin Netanyahu stated that the conflict with Iran and Hezbollah "has not yet ended," and Iran's military warned of harsher responses to any continued Israeli aggression, highlighting lingering uncertainty about the permanence of the ceasefire [2].
Recent strong US employment data has reignited domestic inflation fears and shifted Federal Reserve monetary policy expectations. The probability of a quarter-point Fed rate hike in December increased to 42%, up from 14% a month ago, according to the CME FedWatch Tool [2]. Investors are closely watching Wednesday's US Consumer Price Index (CPI) and Thursday's Producer Price Index (PPI) reports for further guidance on the Fed's policy path [1][2]. In contrast, Swiss inflation cooled unexpectedly, with the May CPI at 0.6%, below the 0.8% consensus, dampening rate hike expectations by the Swiss National Bank (SNB). SNB Chairman Martin Schlegel reassured markets that medium-term inflationary pressures remain stable, and investors expect the SNB to hold its benchmark rate at 0% through 2026 [2].
Technically, gold bears have the upper hand following last week's breakdown and close below the 200-day Simple Moving Average (SMA), which triggered further bearish sentiment, although some resilience was seen near descending channel support [1].
CONCLUSION
Gold and the Swiss Franc remained steady amid geopolitical de-escalation between Iran and Israel and shifting central bank expectations. While optimism from the ceasefire supported safe-haven assets, persistent inflation concerns and hawkish Fed bets capped gains. Upcoming US inflation data and ongoing geopolitical developments are expected to drive further market volatility.