TLDRSpot gold advanced 1.0% to reach $4,397.47 per ounce on Wednesday, while futures edged marginally higher to $4,441.86Gold found support from U.S. dollar softness, influenced in part by Japanese yen strengthRenewed military exchanges between the U.S. and Iran sent Brent crude oil prices back over the $100 thresholdTraders now assign a 60% probability to a 25-basis-point Federal Reserve rate increase at next week’s policy meetingUpcoming August consumer and producer price inflation reports this week may influence Fed policy expectationsGold prices advanced during Wednesday’s session, buoyed by greenback weakness and escalating Middle Eastern hostilities, though increasing probability of Federal Reserve monetary tightening constrained the rally.Spot gold appreciated 1.0% to settle at $4,397.47 per ounce. Futures contracts for gold edged up 0.1% to $4,441.86 per ounce during morning trade.Gold Dec 26 (GC=F)The U.S. dollar index remained relatively steady at 98.77. Market observers note that the Japanese yen’s recent appreciation has exerted modest downward pressure on the greenback. Dollar depreciation typically reduces gold’s cost for international buyers using alternative currencies, potentially boosting purchasing activity.Middle East Conflict Adds to Market PressureMilitary confrontations between the United States and Iran intensified in the Middle East theater, driving Brent crude petroleum prices back beyond the $100-per-barrel mark. The strategically vital Strait of Hormuz, positioned along Iran’s southern coastline, remains central to petroleum supply chain anxieties.BREAKING: Iran's IRGC announces it carried out the single largest attack in the Strait of Hormuz of the war, striking 10 vessels in retaliation for tonight's US strikes on 5 Iranian oil tankers.The IRGC says it struck 8 oil tankers attempting to pass through the Strait and the…— The Hormuz Letter (@HormuzLetter) September 9, 2026Escalating energy costs compound inflationary pressures. This development carries significance as monetary authorities, including the Federal Reserve, maintain their focus on dampening price growth.Financial markets currently indicate a 60% likelihood of a 25-basis-point rate increase by the Fed at next Wednesday’s policy deliberation. This represents a substantial jump from the 40% probability calculated just seven days earlier.Interest rate increases typically disadvantage gold. Since the precious metal generates no income stream, rising borrowing costs enhance the relative attractiveness of yield-bearing instruments such as government bonds.“Gold has recently come under increased pressure following a change in expectations around U.S. interest rates,” said Rick Kanda, Managing Director at The Gold Bullion Company.Inflation Data Could Be the Next Turning PointThe yellow metal posted an impressive nearly 10% appreciation during August, representing its strongest monthly performance since January. That surge culminated in a late-August zenith of $4,685 per ounce.Kanda observed that rapid price rallies frequently trigger profit-taking behavior, particularly when economic indicators reinforce the rationale for monetary tightening.He cautioned that gold valuations could retreat toward the lower $4,000 range should rate-increase expectations continue strengthening. However, he acknowledged the potential for prices to revisit August’s peak levels.Naeem Aslam from Zaye Capital Markets noted that geopolitical instability can channel investment flows toward gold as a protective holding. Nevertheless, he emphasized that conflict-driven inflation in energy and commodity sectors might simultaneously elevate Treasury yields and diminish gold’s attractiveness.Market participants are closely monitoring this week’s scheduled releases of August Consumer Price Index and Producer Price Index figures. These inflation measurements could prove instrumental in determining the Federal Reserve’s upcoming policy trajectory.The central bank has communicated its commitment to combating inflationary pressures. Recent indicators showing labor market resilience have bolstered arguments favoring additional rate tightening.Gold currently faces opposing market dynamics: safe-haven investment demand stemming from deteriorating geopolitical conditions, counterbalanced by monetary tightening pressures that increase the opportunity cost of non-yielding asset ownership.The post Gold Climbs 1% as Geopolitical Tensions and Dollar Weakness Offset Fed Rate Concerns appeared first on Blockonomi.