Gold moves higher against the US Dollar (USD) on Tuesday as traders digest mixed US Retail Sales data and monitor escalating tensions in the Middle East. At the time of writing, XAU/USD is trading around $3,392, supported by rising safe-haven demand amid renewed geopolitical risks.

The latest US Retail Sales report delivered mixed signals. Headline sales fell 0.9% in May, a steeper drop than the expected 0.7% decline and the sharpest contraction since early 2024.

Sales excluding autos also declined 0.3%, indicating broad-based consumer weakness.
However, the control group, which directly influences Gross Domestic Product (GDP), rose 0.4%, rebounding from April's -0.1%, suggesting that underlying consumption remains firm.

For the Federal Reserve (Fed), the data complicates the policy outlook. While weaker headline figures strengthen the case for future rate cuts, the firm control group reflects resilience, potentially delaying any monetary easing.

Meanwhile, geopolitical risks continue to support gold prices. The Israel-Iran conflict has intensified, with reports of fresh missile and drone strikes escalating fears of a broader regional war. Concerns over the security of the Strait of Hormuz—a key global oil transit route are further fueling demand for safe-haven assets, such as Gold, as traders brace for potential market disruptions.

Factors to watch for Gold

The Israel–Iran conflict remains a key upside risk to global inflation, particularly through its potential impact on Oil supply and shipping routes. A sharp escalation could drive energy prices higher, stall progress in disinflation, and force central banks to keep interest rates elevated for longer.

This scenario could harm Gold, as it faces competing forces of inflation hedging and higher US yields.

The US President Donald Trump stated in a post on Truth Social on Tuesday: "I have not reached out to Iran for ‘Peace Talks' in any way, shape, or form. This is just more HIGHLY FABRICATED, FAKE NEWS! If they want to talk, they know how to reach me." He added that Iran "should have taken the deal that was on the table would have saved a lot of lives."

Markets reacted after Trump had earlier called for Iranian citizens to evacuate Tehran, warning of further strikes. Israeli Prime Minister Benjamin Netanyahu echoed the message as Israeli airstrikes continued targeting Iranian nuclear and military sites. On Tuesday, Iran's Revolutionary Guards confirmed new missile and drone attacks on Israeli positions.

The growing risk of a full-blown regional war has sent XAU/USD climbing back toward $3,400.
The focus on Wednesday will be on the Fed's Summary of Economic Projections (SEP) and the dot plot, which could reveal whether officials still anticipate one or two rate cuts in 2025 or scale back expectations in light of recent inflation risks.

Source: Fxstreet