Gold prices firmed on Tuesday as the U.S. dollar and Treasury yields slipped while investors strapped in for a bunch of U.S. economic data due this week that could provide more clarity on the Federal Reserve's interest rate path.
Spot gold was up 0.6% at $2,038.59 per ounce. U.S. gold futures settled 0.6% higher at $2,052.1.
The gains were helped by a 0.4% decline in the dollar index , while benchmark U.S. 10-year Treasury yields were hovering near their lowest levels since July.
Investors are buying gold as there are fewer incentives for people to get rid of it, with the market betting the Federal Reserve will cut interest rates before they achieve their 2% inflation target, said Bart Melek, head of commodity strategies at TD Securities.
Lower bond yields and interest rates reduce the opportunity cost of holding non-interest-bearing gold.
Fed Chair Jerome Powell said last week that the Fed's monetary policy is likely done with a tight monetary policy, with discussion on cuts to borrowing costs moving "into view." However, some Fed officials have pushed back against the surging market expectations of rate cuts.
Markets are pricing in about a 75% chance of a rate cut in March, according to the CME FedWatch tool.
Traders are looking towards a slew of U.S. economic data this week, including the November core personal consumption expenditure index report due on Friday, considered to be the Fed's preferred measure of underlying inflation. It's a question of when the Fed will lower its interest rates, so we see no reason for any significant downward correction of the gold price in the foreseeable future, Commerzbank said in a note.
Swiss gold exports fell in November partly due to a drop in shipments to India, Swiss customs data showed on Tuesday.
Spot silver gained 1.1% to $24.03 per ounce, while platinum was up 1.3% at $957.08. Palladium climbed 3.2% to $1,222.14, rising for the seventh consecutive session.