Gold Prices Rebound on Weak USD, Await Key US Inflation Data

Gold prices regained some traction on Tuesday as the US Dollar (USD) pulled back from a three-week high, but traders seem hesitant ahead of key US inflation data.

The USD decline was led by the Japanese Yen (JPY), which has been rallying in recent days. However, hawkish expectations for a Fed rate hike and geopolitical uncertainties are limiting USD losses and capping gold prices.

Traders are waiting for the release of the latest US inflation figures, with the US Producer Price Index (PPI) due on Thursday and the US Consumer Price Index (CPI) on Friday. The data will provide cues about the Fed's policy path amid inflation risks stemming from higher energy prices.

According to strategists at OCBC, the recent US payrolls report reinforced the resilience of the US economy and kept the risk of Fed tightening alive, which may restrain USD downside. However, they expect markets to require firmer inflation evidence before pricing a September rate hike with greater conviction.