Gold hit a notable decline on Tuesday, continuing to move within a bearish channel on the four-hour timeframe. The yellow metal is currently trading near the first support level at $4105, if it breaks below this level, the decline could extend toward the second support level at $4050. On the upside, if the price rises above the daily pivot point at $4158, it could test resistance levels near $4223 then $4281.
Financial markets remained focused on shifting expectations for U.S. monetary policy and easing geopolitical tensions on Tuesday. The U.S. Dollar Index hovered near a one-year high, supported by growing expectations of further Federal Reserve rate hikes, while U.S. Treasury yields climbed as investors reassessed the outlook for interest rates. Meanwhile, oil prices moved lower as concerns over supply disruptions through the Strait of Hormuz eased following progress in peace talks, reducing the geopolitical risk premium that had recently supported crude markets.
Market Watch
U.S. Dollar Index Hovers Near One-Year High
The U.S. Dollar Index (DXY) hovered near its highest level in more than a year on Tuesday, supported by growing market expectations that the Federal Reserve may raise interest rates in the coming months, while continued demand for the U.S. currency as a safe-haven asset also boosted the greenback.
The index traded around the 101 level, its highest since May 2025, as strong U.S. economic data and expectations of a hawkish monetary policy stance increased the dollar’s appeal against a basket of major currencies.
Market pricing indicates rising odds of additional U.S. interest rate hikes in upcoming Federal Reserve meetings, while policymakers continue to emphasize the need to maintain restrictive monetary conditions to keep inflationary pressures under control.
Meanwhile, major currencies remained under pressure against the dollar. The euro fell to multi-month lows, while the Japanese yen hovered near its weakest levels in decades amid the widening policy divergence between the United States and Japan.
Investors are now awaiting key U.S. inflation and economic activity data later this week, which could provide further clues regarding the future path of U.S. interest rates during the second half of the year.
U.S. Treasury Yields Rise as Expectations for Interest Rate Hikes Increase
U.S. Treasury yields rose during Tuesday’s trading session, supported by growing investor expectations that the Federal Reserve may raise interest rates in the coming months amid persistent inflationary pressures and resilient U.S. economic data.
The yield on the two-year Treasury note, which is highly sensitive to monetary policy expectations, climbed to its highest level in around 16 months, while the benchmark 10-year Treasury yield advanced toward its highest level in several months.
The move followed the Federal Reserve’s decision to leave interest rates unchanged at its latest meeting, while signaling that further monetary tightening could be warranted if inflation remains above its 2% target.
Comments from several Federal Reserve officials, along with market expectations for additional rate hikes at upcoming meetings, further pressured the bond market as investors reassessed the outlook for monetary policy during the second half of the year.
Investors are now closely watching upcoming U.S. inflation data, which could provide important clues regarding the timing and magnitude of any future interest rate increases, as the Federal Reserve maintains a cautious stance toward inflation risks.
Oil Falls as Investors Focus on Strait of Hormuz Flows Following Peace Talks
Oil prices declined during Tuesday’s trading session as investors shifted their focus to the continued flow of crude shipments through the Strait of Hormuz following positive developments in peace talks between the United States and Iran, easing concerns over potential supply disruptions in one of the world’s most important energy shipping routes.
Brent crude and U.S. West Texas Intermediate (WTI) futures moved lower as markets assessed the possibility of reduced geopolitical risks in the Middle East after signs of progress in diplomatic efforts aimed at easing tensions between Washington and Tehran.
Oil prices had posted strong gains in recent weeks amid fears that shipping traffic through the Strait of Hormuz could be disrupted. However, diminishing concerns over supply interruptions prompted traders to take profits and reassess the geopolitical risk premium embedded in crude prices.
At the same time, investors continue to monitor global energy demand prospects and the outlook for U.S. monetary policy, as expectations of higher interest rates could weigh on global economic growth and, in turn, oil consumption in the coming months.
Analysts believe that the uninterrupted flow of supplies through the Strait of Hormuz is likely to keep downward pressure on oil prices in the near term, particularly if diplomatic efforts continue to make meaningful progress toward reducing regional tensions.
Looking Ahead
Markets are closely watching upcoming U.S. economic releases, with investors awaiting the publication of the Manufacturing and Services Purchasing Managers’ Index (PMI) data for further signals on the strength of the U.S. economy. The figures are expected to provide fresh insight into business activity across both sectors and help shape expectations for the Federal Reserve’s next policy moves, particularly amid ongoing uncertainty over inflation and interest rates.