Gold Sees Support from Yen Surge Amid Inflation Fears

Gold prices rose on Tuesday as a surge in the Japanese yen weakened the US dollar. This move made gold cheaper for buyers using other currencies, supporting its price despite other challenging macroeconomic factors.

The yen's rally, which began last week, has traders betting that the Bank of Japan will raise interest rates. This has also contributed to a weaker greenback, which normally has an inverse relationship with gold. As a result, gold found support from the currency move and recovered some losses from the previous session.

However, gains are being limited by inflation risks linked to disruptions around the Strait of Hormuz. Oil prices rose after renewed US and Iranian clashes, with Brent approaching $100 a barrel. Markets continue to price in roughly a 60% chance of a Fed rate hike next week, reflecting the impact of last week's stronger nonfarm payrolls report.

The immediate test will come from US consumer price data later this week, which could determine whether the recent increase in rate hike expectations is sustained. China's central bank demand also continues to provide a floor for gold, with the People's Bank of China accelerating purchases in August to the highest monthly level since 2023.