Gold prices fell on Tuesday as a stronger U.S. dollar and investor caution ahead of the Federal Reserve’s policy decision overshadowed easing geopolitical tensions in the Middle East, while declining oil prices and lower Treasury yields reflected growing optimism that the U.S.-Iran conflict may move toward a diplomatic resolution.

Spot gold dropped 1.3% to $4,021.18 per ounce by 1020 GMT, while U.S. gold futures for August delivery fell 1.4% to $4,021.50. The precious metal remained under pressure as the U.S. dollar hovered near a four-week high, making dollar-denominated bullion more expensive for overseas buyers and curbing international demand.

Market participants are largely focused on the Federal Reserve’s two-day policy meeting, with investors awaiting Wednesday’s interest rate announcement and accompanying guidance for clues on the future path of U.S. monetary policy.

“Gold has been holding to a very tight range based on support in the $4,000 region since late June, which suggests that at some stage there will be a break-out,” Rhona O’Connell, head of market analysis at StoneX, said.

“Fundamentally, the physical markets are still very quiet while professionals are contorting on the interaction between oil, interest rates and the dollar, all of which are important drivers,” she added.

Gold, which pays no interest, tends to perform better when interest rates are low because the opportunity cost of holding the metal declines. Conversely, expectations of higher borrowing costs generally weigh on bullion by increasing the attractiveness of interest-bearing assets such as bonds.

Those dynamics have become increasingly important as investors reassess inflation expectations following recent swings in oil prices driven by tensions in the Middle East. Adding another layer of uncertainty, President Donald Trump renewed pressure on the Federal Reserve to ease monetary policy on Monday, saying the United States should have the world’s lowest interest rates.

However, markets remain uncertain over the Fed’s next move. According to the CME FedWatch Tool, roughly 34% of traders expect a 25-basis-point rate increase at this week’s meeting, while expectations for another increase in September remain elevated.

Geopolitical developments also remained in focus. Trump said Washington was holding “good talks” with Iran and that there was a chance of reaching an agreement to resolve the conflict, though he warned military strikes could resume if negotiations failed.

The diplomatic optimism weighed on energy markets.

Brent crude futures fell $2.53, or 2.9%, to $85.83 a barrel, while U.S. West Texas Intermediate crude dropped $1.98, or 2.4%, to $80.63, extending losses and touching their lowest levels in more than a week.

Investors also reacted to reports that Oman had presented Iran with a proposal for a joint regional mechanism to manage shipping through the Strait of Hormuz using a voluntary fee system. The proposal raised hopes that one of the world’s most strategically important oil transit routes could remain open and secure, easing fears of supply disruptions.

“While flows of vessels through the Strait of Hormuz remain low, the market hopes the situation improves based on new talks between Oman and Iran on a new mechanism for Hormuz,” UBS analyst Giovanni Staunovo said.

The retreat in crude prices also filtered through to the U.S. Treasury market, where investors trimmed safe-haven positions.

The benchmark 10-year Treasury yield, which influences borrowing costs across the economy including mortgages, auto loans and corporate debt, slipped 2 basis points to 4.622%.

The policy-sensitive two-year Treasury yield also declined 2 basis points to 4.301%, while the 30-year Treasury yield fell more than 1 basis point to 5.111%.

Bond yields move inversely to prices, meaning rising demand for Treasuries pushes yields lower.

Lower Treasury yields typically provide some support for gold by reducing the opportunity cost of holding non-yielding assets. However, Tuesday’s decline in bullion suggested that the stronger dollar and uncertainty surrounding the Fed’s policy outlook remained the dominant market drivers.

Investors will now closely scrutinize the Federal Open Market Committee’s policy statement, economic projections and Chair Jerome Powell’s comments for signals on whether policymakers still intend to keep rates elevated to combat inflation or are becoming more confident that price pressures are easing.

Beyond gold, the broader precious metals complex also weakened. Spot silver fell 2% to $57.21 per ounce, platinum lost 1.6% to $1,595.80, and palladium declined 3.2% to $1,250.25.

Analysts said gold’s ability to hold above the psychologically important $4,000 level suggests investors remain reluctant to abandon defensive positions entirely, particularly given persistent geopolitical risks and uncertainty surrounding the Fed’s policy path. A decisive break above or below that range could determine the metal’s next major move, depending on the outcome of the Fed meeting, the trajectory of the U.S. dollar and developments in the Middle East.

Barclays reported a stronger-than-expected 17% increase in first-half profit on Tuesday, fueled by robust investment banking performance and a surge in equities trading as volatile financial markets lifted client activity.

The results reinforced the earnings power of the bank’s diversified business model, although investors sent the shares lower as expectations had already risen following blockbuster trading results from Wall Street rivals.

Britain’s third-largest listed lender posted pre-tax profit of £6.1 billion ($8.11 billion) for the six months ended June, exceeding analysts’ average forecast of £5.94 billion.

Despite the earnings beat, Barclays shares fell nearly 5% in early trading, reflecting investor concerns that the bank’s trading performance, particularly in equities, failed to match the exceptional results delivered by major U.S. investment banks.

The decline also highlighted how elevated expectations have become after Barclays’ shares climbed nearly 50% over the past year, making it one of the strongest-performing banking stocks in Europe.

The bank coupled its earnings announcement with fresh capital returns to shareholders, unveiling a £1 billion share buyback, comfortably above analysts’ expectations of £831 million, alongside £800 million in dividend payments. The move underscores management’s confidence in the bank’s capital position and earnings outlook while continuing its strategy of returning excess capital to investors.

Barclays also raised its full-year income guidance to £31.5 billion, up from its previous forecast of £31 billion, and said it remains on track to achieve the financial targets it has set for 2026.

Investment Banking Remains The Key Differentiator

The results once again highlighted Barclays’ unique position among British lenders. Unlike domestic-focused competitors such as Lloyds and NatWest, Barclays derives a substantial portion of its earnings from its global investment banking franchise, allowing it to benefit from periods of heightened market activity that often accompany geopolitical uncertainty and economic volatility.

The investment banking division generated £4 billion in income during the second quarter, comfortably ahead of analysts’ expectations of £3.7 billion.

Equities trading was the standout performer, with revenue jumping 45% from a year earlier as institutional investors increased trading activity amid sharp market swings triggered by the conflict involving Iran, changing expectations for interest rates and continued enthusiasm for artificial intelligence-related stocks.

However, while the growth was impressive in absolute terms, it still trailed the performance of leading U.S. banks, whose equities trading revenue increased by an average of 69%, helped by exceptionally strong client activity and a surge in capital markets transactions, including the highly anticipated SpaceX initial public offering.

Barclays also underperformed in fixed-income trading, traditionally one of its strongest businesses.

Revenue from fixed-income, currencies and commodities (FICC) trading rose just 1%, well below the 13% average increase recorded by the five largest U.S. investment banks, according to Reuters calculations.

The comparison illustrates the competitive challenge Barclays continues to face in narrowing the performance gap with Wall Street’s biggest investment banking franchises, which benefit from larger client bases and greater scale across global capital markets.

Market Volatility Continues To Support Trading Businesses

Financial market volatility has been a significant earnings driver for investment banks this year. Geopolitical tensions, fluctuating oil prices, shifting expectations for central bank policy and rapid developments in artificial intelligence have prompted institutional investors to rebalance portfolios more frequently, boosting demand for trading services.

At the same time, a revival in mergers and acquisitions and an increase in initial public offerings have generated stronger advisory and underwriting fees across the industry, providing another source of earnings growth for investment banks.

Barclays’ results suggest it continues to benefit from these trends, although not to the same extent as some of its U.S. competitors.

But one area that tempered the otherwise solid earnings report was the bank’s guidance on costs. Barclays said it expects an additional £500 million in expenses during the second half of the year, including investments aimed at simplifying its operations and improving efficiency.

Chief Financial Officer Anna Cross said up to £300 million would be spent on structural initiatives designed to streamline the organisation.

“We anticipate spending up to £300 million in structural cost actions, directly related to making the organisation simpler, such as platform change processes,” Cross told reporters during a conference call.

While the additional spending will weigh on near-term profitability, management views the investments as necessary to reduce long-term operating costs and improve efficiency across the business.

Political Uncertainty Remains A Key Focus

Barclays is the first major British lender to report earnings this reporting season, with investors also closely monitoring the policy agenda of Prime Minister Andy Burnham’s government.

Britain’s banking sector has enjoyed record profitability over the past several years, benefiting from higher interest rates and resilient loan demand. That performance has fueled speculation that the new government could consider increasing taxes on banks or introducing additional sector-specific levies.

Those concerns eased after Reuters reported last week that Burnham’s administration is expected to maintain the previous government’s broadly pro-growth approach toward the financial services industry, providing some reassurance for investors.

Barclays’ latest results bolster the temerity of its diversified business model, with investment banking continuing to offset pressures in other parts of the business. The higher income guidance, stronger-than-expected profit and larger shareholder distributions point to continued confidence in the bank’s financial position.

However, Tuesday’s share price decline indicates that investors are demanding more than solid earnings. After a year of strong stock market gains and record trading performances by major U.S. banks, markets are increasingly focused on whether Barclays can close the performance gap with its Wall Street peers while managing higher restructuring costs and navigating an uncertain political and economic landscape in the UK.