Gold Prices Rebound as Dollar Weakens Ahead of US Inflation Data

Gold prices rose on Tuesday as a softer U.S. dollar supported precious metals, although escalating Middle East tensions and expectations of further Federal Reserve interest-rate hikes continued to limit gains.

Spot gold (XAU/USD) climbed 0.5% to $4,191.76 per ounce at 04:32 GMT, while U.S. gold futures advanced 0.6% to $4,215.87. The U.S. Dollar Index slipped 0.2% to 102.43, making dollar-denominated bullion more affordable for overseas buyers.

Other precious metals also gained, with silver rising 0.3% to $60.50 per ounce. Platinum increased 0.3% to $1,697.26, while palladium added 0.4% to $1,147.50.

Despite Tuesday's recovery, gold remained under pressure as geopolitical tensions threatened to prolong global inflation. Brent crude approached $106 per barrel following attacks by Iran-backed Houthi forces on Saudi Arabia's main airport, intensifying concerns about regional security and energy supply disruptions.

Gold has declined approximately 20% since the U.S.-Iran conflict began in late February. Rising oil prices have fueled inflation expectations, strengthening the case for tighter monetary policy and higher borrowing costs.

Elevated interest rates generally reduce gold's attractiveness because bullion does not generate interest income. Higher Treasury yields and persistent inflation concerns have further challenged demand for the safe-haven asset.

Investors are now awaiting Wednesday's U.S. Consumer Price Index (CPI) report, which could provide important signals about the Federal Reserve's next interest-rate decision.

Financial markets currently assign roughly a 20% probability of another Fed rate hike at the October meeting, while anticipating one additional increase before year-end.

Cleveland Federal Reserve President Beth Hammack said Monday that smaller, more frequent monetary policy adjustments could help prevent inflation expectations from becoming entrenched. However, she did not explicitly support an October rate increase.

A stronger-than-expected CPI reading could reinforce expectations of further monetary tightening, potentially pressuring gold prices. Conversely, softer inflation figures could weaken the dollar and improve bullion's outlook.

With Middle East instability keeping energy prices elevated, gold investors remain focused on inflation trends, Federal Reserve policy expectations and developments in global financial markets.