Spot gold retreated Tuesday after reaching a two-month high of $4,434.84, settling at $4,369.57—a 0.4 percent decline from its session peak.
U.S. gold futures held firmer, rising 0.2 percent to $4,430.20, a divergence that reflects traders positioning ahead of key inflation releases.
Investors are awaiting U.S. consumer price data due Wednesday and producer price data due Thursday. A higher-than-expected reading could strengthen the case for a rate increase at the Fed's next meeting, Hamad Hussain, climate and commodities economist at Capital Economics, said.
Markets are pricing in a nearly 50 percent probability of a September rate hike, up from 44 percent on Monday, according to the CME FedWatch tool.
Cleveland Federal Reserve Bank President Beth Hammack said Monday she favors a gradual approach to raising interest rates to avoid more aggressive increases later.
Gold typically serves as an inflation hedge, but rising interest rates erode its appeal because it offers no yield.
Geopolitical tensions provided an offsetting support. Donald Trump, president, responding to Iran's conditions for a peace deal, demanded compensation for war and attack victims—comments that intensified uncertainty over efforts to reopen the Strait of Hormuz.
Saxo Bank analyst Ole Hansen said the outlook for precious metals was improving, citing structural demand that prevented a deeper correction and tentative signs of returning Western investor interest.
Elsewhere in precious metals, spot silver fell 1.5 percent to $64.73, platinum lost 0.7 percent to $1,740.06 and palladium declined 1.4 percent to $1,363.42.
