Gold prices moved higher on Tuesday after oil prices dropped more than 9% over the previous four sessions.
The sharp decline in crude helped ease inflation concerns and reduced some expectations for additional Federal Reserve interest rate increases.
A weaker U.S. dollar also supported bullion. At the same time, renewed hopes for diplomacy between the United States and Iran improved market sentiment.
At 21:04 ET, or 01:04 GMT, XAU/USD rose 0.4% to $4,359.40 an ounce.
Gold futures gained 0.3% to $4,396.85, while silver rose 0.6% to $66.43 an ounce. Platinum also advanced 0.3% to $1,809.03.
Meanwhile, the U.S. Dollar Index slipped 0.03% to 100.39.
Falling Oil Prices Ease Inflation Concerns
Gold rebounded after falling on Monday, when the metal recorded its largest daily decline in a week.
The recovery came as oil prices stabilized following a drop of more than 9% over four trading sessions.
Lower energy prices can reduce broader inflation pressures because fuel and transportation costs affect a wide range of goods and services.
As a result, the recent oil decline has also lowered some expectations for further Federal Reserve tightening.
Gold often benefits when interest rate expectations fall because the precious metal does not pay interest or generate income.
U.S.-Iran Diplomacy Returns to Focus
Gold prices also received support from renewed diplomatic signals surrounding tensions between the United States and Iran.
President Donald Trump is scheduled to address the United Nations General Assembly in New York later on Tuesday.
He has also indicated that he is open to meeting Iranian President Masoud Pezeshkian on the sidelines of the event.
The possibility of renewed talks has attracted attention after months of conflict and disruptions affecting Middle East energy flows.
Any improvement in the outlook for oil supplies could place further downward pressure on energy prices and help reduce inflation concerns.
Federal Reserve Officials Send Mixed Rate Signals
Investors are also closely monitoring comments from Federal Reserve officials.
The central bank unanimously raised interest rates by 25 basis points last week. It was the Fed’s first rate increase in three years.
Chicago Federal Reserve President Austan Goolsbee said policymakers cannot simply ignore persistent supply shocks.
He argued that the central bank may need to respond even if tighter policy creates additional pressure on the economy.
St. Louis Fed President Alberto Musalem also suggested that further interest rate increases could be necessary.
According to Musalem, additional tightening may be required to bring inflation back toward the Federal Reserve’s target.
Strong Dollar Previously Weighed on Gold
Gold’s decline on Monday followed rising expectations that the Federal Reserve could tighten monetary policy further this year.
Hawkish signals from other major central banks also contributed to dollar strength.
A stronger dollar often puts pressure on gold because the metal becomes more expensive for buyers using other currencies.
However, Tuesday’s slight decline in the U.S. dollar helped improve conditions for bullion.
Gold ETF Demand Remains Strong
Despite near-term pressure from interest rates and the dollar, investment demand for gold remains resilient.
Around 50 tonnes of gold flowed into bullion-backed exchange-traded funds during September.
That puts ETF inflows on track for a third consecutive month of gains.
Continued investment demand could remain an important source of support for gold prices, particularly if inflation concerns ease and expectations for further Federal Reserve rate hikes decline.
