Gold Prices Surge Amid Geopolitical Tensions Ahead of US Inflation Data

Gold prices surged on Wednesday as traders braced for the US inflation data release that could determine whether the metal's recent rebound has further room to run. Spot gold rose 0.5% to about $4,387 an ounce in Asian trading, holding close to the two-month high reached a day earlier.

The rally in gold came as geopolitical tensions widened beyond the US-Iran negotiations that have dominated markets for months. A deadly Houthi attack on an Egyptian-owned vessel in the Red Sea and separate US military action against a ship heading towards Iran raised concerns about a broader escalation around major Middle Eastern shipping routes.

North Korea also launched a ballistic missile on Wednesday, adding another geopolitical flashpoint for markets. Unlike oil, where those developments are primarily a question of lost supply, gold is reacting through investor demand for defensive assets.

Global physically backed gold exchange-traded funds attracted about $3 billion in July, according to the World Gold Council, reversing some of the weakness seen earlier this year. ETF holdings increased by 23 tonnes to 4,068 tonnes, while assets under management reached about $530 billion.