Gold prices recovered on Tuesday after slipping early in the session as renewed tensions in the Middle East revived inflation concerns and investors assessed a weaker outlook for gold investment demand.
The metal remained below the psychologically important $4,000 level, with a stronger energy market and expectations of further Federal Reserve tightening limiting its recovery.
Spot gold fell over 1% early in the session on Tuesday before recovering a bit and was trading at $3953 an ounce with a marginal gain of 0.14 % at 9:00 AM EST.
The recovery followed Monday’s rebound, which had helped bullion recover from a more than one-year low reached on Friday.
Gold is still down approximately 29% from its January record of $5,595 an ounce.
WGC cuts gold investment growth forecast
Investors are also weighing the latest assessment from the World Gold Council (WGC), which pointed to a slowdown in physical investment demand despite continued interest from exchange-traded funds and central banks.
The World Gold Council has halved its forecast for growth in gold investment demand in 2026 to 200 metric tons from its earlier estimate of 400 tons, citing slower purchases of bars and coins.
Gold investment demand fell 14% year over year to 479 tons in the third quarter.
Bar and coin purchases declined 19% to 268 tons, while jewelry consumption dropped 17% to 313 tons, marking its weakest third quarter since records began in 2000.
However, physically backed gold ETFs attracted 211 tons of inflows during the quarter, exceeding expectations despite higher bond yields, a stronger dollar and easing geopolitical tensions.
Central bank purchases also remained robust, climbing 42% to 321 tons.
The WGC raised its full-year central bank buying forecast and now expects purchases to at least match the 848 tons recorded in 2025.
Oil prices revive inflation concerns
Crude oil prices swung on Tuesday after falling more than 7% in the previous session. Brent crude rose over 1%, while WTI gained 1.5% early in the session but both benchmarks were trading lower at the time of writing.
The early rise followed reports of US strikes on Iran’s Qeshm Island and comments from an Iranian official indicating that Washington and Tehran remained far from reaching an agreement to end the conflict.
Higher oil prices threaten to prolong inflationary pressures, potentially forcing the Fed to maintain elevated borrowing costs.
Traders were pricing in a 76% probability of a December rate increase, according to CME FedWatch data.
Higher interest rates increase the opportunity cost of holding non-yielding assets such as gold.
US dollar index remains near 102
The US Dollar Index was trading around 101.8, holding relatively steady after falling on Monday.
The greenback continues to receive some support from safe-haven demand following renewed military activity involving Iran.
A stronger dollar generally makes gold more expensive for international buyers, potentially limiting demand.
US midterm elections in focus
Investors are also watching Tuesday’s US midterm elections, which will determine control of Congress and potentially influence the Trump administration’s policy agenda.
The WGC said a shift toward greater Democratic control could support gold demand, although the policy implications and market reaction remain uncertain.
However, analysts have warned that increased scrutiny of AI infrastructure spending could trigger further technology stock declines.
“A Democratic sweep would likely prove more problematic for the AI data centre build-out and the broader tech trade,” Tim Waterer, chief market analyst at KCM Trade, told Reuters.
“Any further pressure on the tech complex from increased regulatory scrutiny could spill over into gold as positions continue to be cut to cover losses elsewhere.”
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