Gold prices rebounded above the key $4,000-an-ounce mark on Tuesday, while silver rallied over 2%, as softer-than-expected inflation data eased concerns about aggressive US Federal Reserve rate hikes and weakened the dollar.
Spot gold rose 0.5% to $4,020.58 an ounce as of 10:19 a.m. in London, after climbing as much as 0.8% during the session. Silver advanced 0.8% to $58.12 an ounce, while platinum and palladium also traded higher.
In India, precious metals witnessed stronger gains on the Multi Commodity Exchange (MCX). Gold futures for August delivery rose 1.35% to Rs 1,42,208 per 10 grams, while silver futures surged 2.68% to Rs 2,23,556 per kg.
The recovery came after gold had fallen below the psychologically important $4,000 level on Monday, when escalating tensions in the Middle East and hawkish comments from a Federal Reserve official fuelled expectations of higher US interest rates.
The Bloomberg Dollar Spot Index slipped 0.2% after rising in the previous session, providing additional support to bullion prices.
ALSO READ: Trump Says Will Replace 20% Hormuz Cargo Fee With 'Trade Deals'
Earlier US President Donald Trump reinstated a blockade of Iran and demanded a 20% reimbursement on cargoes transiting the Strait of Hormuz, intensifying geopolitical tensions. The developments had pushed oil and European natural gas prices sharply higher, raising fears of inflationary pressures and tighter monetary policy.
Adding to those concerns, Federal Reserve Governor Christopher Waller recently said policymakers may need to raise interest rates if underlying inflation continues to show broad-based price pressures. Following those remarks, swap markets had priced in more than a 40% probability of a rate hike at the Fed's July meeting and at least one increase by the end of the year.
However, the latest inflation data helped ease some of those concerns, prompting investors to return to precious metals after Monday's sharp selloff.
Gold has remained under pressure this month after tumbling 14% in the second quarter, its worst quarterly performance since 2013, as expectations of tighter US monetary policy boosted the dollar and Treasury yields.
Bullion-backed exchange-traded funds have also continued to witness net outflows in recent months, reflecting softer investor demand.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.