Gold prices pulled back from a nine-month high on Tuesday due to a slight uptick in the dollar and U.S. bond yields, although hopes of slower interest rate hikes from the Federal Reserve underpinned the market.
Spot gold rose 0.2% to $1,934.82 per ounce by 1:40 p.m. ET, hitting its highest since late April 2022 earlier in the session. U.S. gold futures settled up 0.4% at $1,935.4.
The dollar index was 0.2% lower against its rivals, making greenback-priced bullion cheaper for many buyers, while benchmark U.S. 10-Treasury yields edged lower from their one-week high.
A survey from S&P Global showed price pressures ticking higher for the first time since last spring, indicating that inflation is far from licked despite the Fed's aggressive measures to contain it.
"I think gold is still holding quite strong as the market expectations are turning more towards a pause from the Fed potentially, or a turn to a more dovish policy," said Ryan McKay, commodity strategist at TD Securities.
The U.S. central bank delivered four consecutive rate hikes of 75 basis points before slowing its pace to 50 bps last month to fight soaring inflation.
Traders are now pricing in a 96% chance the Fed will raise rates by 25 bps at its policy meeting next week.
"As the expectation of inflation continuing to come down, there will be lesser need for Fed interest rate hikes and the market is really focused on the idea of an ending to the Fed interest rate cycle," said David Meger, director of metals trading at High Ridge Futures.
Although gold is considered a hedge against economic uncertainties, higher rates tend to dull zero-yielding bullion's appeal.
Elsewhere, spot silver gained 0.8% to $23.63 per ounce. Holdings in New York's iShares Silver Trust exchange-traded fund increased by 4% on Monday.
Platinum jumped 1% to $1,057.13 while palladium was up 2.2% to $1,741.75.