Dollar Weakness Lifts Gold to $4,435 as Rate-Hike Gloom Lingers

Gold prices rose to $4,435 per ounce on Tuesday, reversing losses from the previous session. The US dollar's weakness was the main driver behind the increase in gold prices.

The Japanese yen surged towards its strongest level of the year, pulling down the US Dollar Index for a second consecutive day. This move made dollar-denominated gold more attractive to overseas buyers and contributed to the rise in gold prices.

However, two headwinds capped gold's advance: escalating US-Iran tensions pushing Brent crude towards $100 per barrel and traders pricing in roughly a 60% probability of a Federal Reserve rate hike next week. The upcoming U.S. Consumer Price Index (CPI) report will be crucial in determining the direction of gold prices.

If inflation comes in above market expectations, rate-hike bets will strengthen further and put downward pressure on gold. Conversely, if the data prints below expectations, expectations for monetary tightening will ease, potentially opening upside room for gold.