Gold Prices Drop as Middle East Tensions Rise Amid Rate Hike Expectations

Gold prices dropped by more than 0.44% on Tuesday to $4,393 as markets reacted to rising tensions in the Middle East and oil prices. The West Texas Intermediate (WTI) crude oil price rose 1% to $92.10 a barrel due to the ongoing conflict.

The US inflation releases, including Thursday's PPI and Friday's CPI, are also on investors' radar. With rates expectations tied to the Federal Reserve (Fed), money markets put the odds of a 25-basis-point Fed hike next week at 63%, according to Prime Terminal.

Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, providing a strong price floor during macroeconomic uncertainty. Historically, massive purchases by central banks like this have helped stabilize the gold market.