Gold rises amid weaker dollar and focus on US inflation data

Gold prices rose on Tuesday thanks to a weaker dollar as investor attention shifted to U.S. inflation data due out later this week that could shed light on the timing of the Federal Reserve's first interest rate cut of the year.

Spot gold rose 0.4 percent to $2,179.43 an ounce. U.S. gold futures added 0.2% to $2,202.7.

Gold hit a record high last week after Fed policymakers said they still expect to cut interest rates by three-quarters of a percentage point by the end of 2024, despite recent strong inflation readings.

"Unless there is significant news indicating an acceleration in the pace of rate cuts, gold is unlikely to reach a new record high before Easter," said Nitesh Shah, commodity strategist at WisdomTree. "However, we expect new records to be broken by the end of the year," he said. WisdomTree expects gold prices to hit $2,350 in the first quarter of 2025.

Traders estimate a 64% probability that the Fed will start cutting rates in June.

The dollar index, meanwhile, fell 0.4% against its peers, making gold less expensive for holders of other currencies. The focus will now turn to the core US personal consumption expenditure price index data due for release on Friday.

Gold prices have also been supported by increased physical demand from Chinese households amid some skepticism about the outlook for the country's real estate and stock market. This helped offset weaker demand from price-sensitive Indian buyers.

Purchases by central banks, which are less price-sensitive than retail consumers, also remained strong, providing additional support for the metal. China's central bank has been the most active buyer since the end of 2022.

"The motivation for their gold purchases is to diversify away from G7 currencies, after these currencies were used as weapons in 2022 after the (Russia-Ukraine) war," Shah said.