Gold prices firmed on Tuesday, as the U.S. dollar weakened to a one-month low for a second consecutive session, making greenback-priced bullion less expensive for overseas buyers.
Spot gold was up 0.7% at $1,866.39 per ounce. U.S. gold futures rallied nearly 1% to $1,865.3, or to its highest levels since May 9 when gold traded as high as $1,885.6.
The dollar, a rival safe-haven asset to gold, has been falling broadly alongside a decline in Treasury yields from multi-year peaks, with aggressive easing by the Federal Reserve already priced in.
"The weaker dollar has helped gold break back above its 200-day average ... and we're not yet convinced the greenback has seen a low," City Index senior market analyst Matt Simpson said.
Kansas City Federal Reserve Bank President Esther George said she expects the U.S. central bank to lift its target interest rate to about 2% by August, with further action dependent on how both supply and demand are affecting inflation.
Non-yielding bullion, seen as a safe store of value during times of economic crises, tends to become less attractive to investors when U.S. interest rates are raised.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.44% to 1,068.07 tonnes on Monday from 1,063.43 tonnes last week.
European Central Bank President Christine Lagarde said on Tuesday she saw the ECB's deposit rate at zero or "slightly above" by the end of September, implying an increase of at least 50 basis points from its current level.