Gold Rally Hinges on Inflation Data as Rate Expectations Rise

Gold prices recovered on Tuesday as the US dollar weakened, but the metal's rally remains uncertain due to upcoming inflation data that could influence the Federal Reserve's interest rate decision.

The dollar index fell about 0.4%, making bullion cheaper for buyers using other currencies, and spot gold gained 0.6% to $4,429.89 an ounce in early Asian trading.

However, the stronger-than-expected US payrolls report last week revived expectations for tighter monetary policy, with a 60% probability assigned to a September Fed increase compared to about 50% before the data.

Ole Hansen, Saxo Bank commodity strategist, said the employment report had lifted bond yields and reinforced expectations of a September rate rise, creating pressure on both gold and silver.