Gold holds near two-month highs as inflation and the Middle East…

12 August 2026

Gold holds near two-month highs as inflation and the Middle East dominate market attention

Written by Antonio Di Giacomo, Senior Market Analyst at XS.com

Gold prices remained virtually unchanged during Tuesday’s session after reaching
their highest level in more than two months and touching the $4,435 per ounce area.
Following this advance, the precious metal experienced moderate profit-taking and
pulled back toward the $4,370 per ounce region. However, it continues to show
strength amid an environment characterized by geopolitical uncertainty, interest rate
expectations, and solid demand for safe-haven assets.

The recent price action confirms that buyers continue to defend elevated levels
following several sessions of recovery. Gold has found support from rising risk
aversion triggered by tensions in the Middle East, as investors assess the prospects
of a diplomatic solution that could fully normalize energy transit through the Strait of
Hormuz. The lack of significant progress continues to keep a geopolitical risk
premium embedded in gold prices.

Another factor supporting gold is demand from China, particularly purchases by its
central bank. The People’s Bank of China increased its reserves again in July,
reinforcing an accumulation trend that reflects monetary authorities’ interest in
diversifying their international assets. Central bank demand has become one of the
main structural pillars of the gold market and could continue to limit significant
corrections in the coming months.

However, the precious metal’s advance is facing pressure from U.S. Treasury yields,
which recently climbed to approximately one-week highs. Rising yields are typically a
negative factor for gold because they increase the opportunity cost of holding an
asset that does not generate interest. This combination of safe-haven demand and
higher yields largely explains the consolidation observed after gold reached $4,435
per ounce.

Market attention is now focused on the U.S. inflation report scheduled for release on
Wednesday, which is considered one of the most important economic indicators of
the week. Expectations point to a moderation in annual headline inflation to
approximately 3.4%, down from the previous 3.5%, while core inflation could decline
from 2.6% to 2.5%. A reading above expectations could strengthen expectations for
tighter monetary policy and put pressure on gold prices.

Expectations surrounding the Federal Reserve have also shifted rapidly in recent
sessions. The market currently assigns approximately a 52% probability to an

interest rate hike in September, compared with 44% on Monday. This shift mainly
reflects renewed concerns that inflationary pressures could remain elevated,
particularly if energy prices continue to rise as a result of geopolitical tensions.
Oil prices have therefore once again become an important variable for the gold
market. Reduced expectations of an agreement between the United States and Iran
that would fully restore normal operations in the Strait of Hormuz have pushed
energy prices higher. If this situation persists, higher oil costs could gradually feed
into different areas of the economy and complicate efforts to bring U.S. inflation
under control.

At the same time, negotiations between Washington and Tehran continue to show
little progress, while maritime traffic through the Strait of Hormuz remains well below
the levels recorded before the conflict. The strategic importance of this route for
global energy supplies means that any further deterioration could trigger renewed
moves in oil prices, raise inflation expectations, and increase financial market
volatility. This environment has historically tended to enhance gold’s appeal.
From a technical perspective, the $4,435 per ounce area represents the first
important level for buyers. A sustained break above this level could reopen the path
toward $4,450 and subsequently the psychological $4,500 per ounce level.
Conversely, a deeper correction could push gold back toward $4,350, while the
$4,300 area could become an important support level if selling pressure intensifies.
In conclusion, gold continues to display a relatively solid structure near its highest
levels in more than two months, supported by uncertainty in the Middle East,
Chinese purchases, and investors’ demand for protection. However, rising Treasury
yields and the growing possibility of a Federal Reserve rate hike are currently limiting
the metal’s upside potential. Wednesday’s U.S. inflation report will be crucial in
determining the next move: higher-than-expected inflation could push yields higher
and pressure the precious metal, while a softer reading could reduce expectations
for further rate hikes and allow gold to make another attempt at breaking above
$4,435 per ounce