Gold rebounds from two-week low as investors await US inflation data

Gold prices recovered on Tuesday after hitting a two-week low earlier in the session, as investors awaited key US inflation data that could provide fresh clues on the Federal Reserve's interest rate path.

Spot gold rose 0.3% to $4,013.93 per ounce by 0300 GMT after touching its lowest level since July 1. US gold futures for August delivery also gained 0.4% to $4,020.80.

The rebound followed a sharp 3% decline in the previous session — the biggest one-day drop in more than a month — as escalating tensions between the United States and Iran pushed oil prices to a one-month high, raising concerns about inflation and the prospect of higher interest rates.

Investors are now focused on the release of the June US Consumer Price Index (CPI) later in the day. Producer Price Index (PPI) data and Federal Reserve Chair Kevin Warsh's semi-annual testimony before Congress are also due this week.

"The markets probably don't want to commit. They have a big batch of event risks in front of them, including the CPI print and developments in the Middle East," said Ilya Spivak, head of global macro at Tastylive.

On Monday, Federal Reserve Governor Christopher Waller said the US central bank may need to raise interest rates in the near term if inflation continues to remain well above its 2% target.

According to the CME FedWatch Tool, traders have increased expectations of a September rate hike, with the probability rising to around 76%, compared with 57% a week earlier.

Among other precious metals, spot silver slipped 0.1% to $57.60 per ounce after touching a two-week low. Platinum fell 0.5% to $1,597.52, while palladium gained 0.6% to $1,254.82.