Gold prices edged down on Tuesday as investors awaited critical U.S. inflation data, which could influence the Federal Reserve's timeline for cutting interest rates.
Spot gold fell 0.3% to $2,342.80 per ounce at 0732 GMT, following a 1% rise on Monday. In contrast, U.S. gold futures rose 0.4% to $2,343.80.
"A very strong dollar, supported by a potential shift in US monetary policy where the Fed may look for evidence to initiate interest rate hikes instead of easing, poses a major risk.
This could lead to a further corrective move in spot gold," said Kelvin Wong, senior market analyst for Asia Pacific at OANDA.
Nonetheless, Wong noted that spot gold remains positively skewed in the short term, with $2,310 being a crucial support level for the week.
The core personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, is expected on Friday. Recent Fed meeting minutes indicated a pause in the benchmark policy rate but highlighted discussions of possible future hikes.
Traders are pricing in a 63% chance of a rate cut by November, according to the CME FedWatch Tool.
Bullion is traditionally seen as a hedge against inflation, though higher interest rates increase the opportunity cost of holding non-yielding gold.
Other precious metals saw declines, with spot silver dropping 0.8% to $31.42, platinum down 0.7% to $1,047.20, and palladium decreasing 0.7% to $982.24. Meanwhile, Vietnam's central bank announced on Monday that it would cease auctioning gold in the domestic market and introduce new measures to stabilise prices.
