The XAU/USD pair remained high above $5,400 as safe-haven assets supported by the Middle East conflict and market players took cues from Fed officials this week.
At 8.40 am, gold prices were at $5,352, up about 0.56% since it opened early Tuesday in Asian trading.
The United States (US) and Israel targeted Iran's top leadership and nuclear infrastructure over the weekend. US President Donald Trump stressed that military operations would continue until Washington's objectives were achieved.
This development increases the risk of a broader and prolonged conflict in the Middle East.
The geopolitical tensions have triggered risk-off sentiment in global financial markets. Investors have turned to safe-haven assets such as gold, thus supporting the rise in the price of the precious metal in current trading.
At the same time, the surge in oil prices has revived inflation concerns. Energy price pressures could make it harder to bring down inflation, causing the market to reduce expectations of a rate cut by the Federal Reserve (Fed) in the near future.
A high interest rate environment typically puts pressure on non-yielding assets such as gold.
The market currently expects the Fed to keep interest rates at current levels at least until the summer, despite Trump's continued push for a rate cut to support the economy.
Attention will now turn to speeches from several Fed officials, including New York Fed President John Williams, Kansas City Fed President Jeff Schmid, and Minneapolis Fed President Neel Kashkari.
Any hawkish statements on inflation and monetary policy could strengthen the US Dollar (USD) and weigh on the prices of dollar-denominated commodities.
