Investing.com — Gold prices edged higher on Tuesday after tumbling 4% in the previous session, but remained near a seven-week low as the standoff between the U.S. and Iran over the Strait of Hormuz kept energy prices elevated and reinforced expectations for further Federal Reserve rate hikes.

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At 00:13 ET (04:13 GMT), XAU/USD rose 0.4% to $4,131.10 an ounce, while Gold Futures fell 0.2% to $4,162.32. XAG/USD fell 0.3% to $60.45, while XPT/USD declined 1% to $1,700.17. The U.S. Dollar Index rose 0.1% to 101.27.

Hormuz impasse keeps oil, Treasury yields elevated

Oil prices extended gains as Iran remained firm on its conditions for reopening the Strait of Hormuz.

Iranian officials had privately expressed pessimism about reaching an agreement with Washington to end hostilities before the U.S. midterm elections in November, after President Donald Trump rejected Tehran’s latest proposal to reopen the critical waterway within seven days.

The U.S.-Iran conflict is now in its eighth month, keeping pressure on global energy flows and inflation expectations.

The renewed rise in oil prices also intensified the selloff in the U.S. Treasury market on Monday. The 10-year Treasury yield climbed to a fresh 19-year high, increasing the cost of holding gold, which does not generate interest income.

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The Treasury selloff that began after the U.S.-Iran conflict erupted in late February has accelerated over the past month, raising fresh risks for the economy as higher yields push up borrowing costs.

The Trump administration has sought to ease pressure on longer-dated borrowing costs by increasing Treasury buybacks, but yields have continued to rise.

Cleveland Fed President Beth Hammack said the increase in long-term yields reflects several factors, including a stronger growth outlook, concerns about government debt and expectations for additional interest rate increases.

Gold falls 7% in September as Fed outlook tightens

Gold has now fallen about 7% in September, despite reaching around $4,510 earlier this month. The decline follows the Fed’s first interest rate increase since 2023, with policymakers also leaving open the possibility of further hikes as they address persistent U.S. inflation.