Gold hit a more than three-month high on Tuesday, extending a rally driven by the U.S. Treasury's recent buyback announcement, while investor focus shifted to key inflation data and a speech later this week by Federal Reserve Chair Kevin Warsh.
Spot gold was up 0.4% at $4,668.19 per ounce, as of 0146 GMT, after hitting its highest since May 14 earlier in the session. U.S. gold futures rose 0.6% to $4,724.50.
Gold has continued higher, with the return of the debasement trade last week fuelling the latest leg of the gains, IG market analyst Tony Sycamore said.
"Looking ahead, we expect dips in gold to be well supported from buyers looking for gold to make its way towards the next upside resistance at $4,900/$5,000," he said.
Prices rose sharply last week after the U.S. Treasury Department said it would double the size of liquidity support buyback operations for longer-dated notes and bonds. The announcement spurred currency debasement fears.
"These U.S. dollar debasement fears should see gold be well-supported in the coming weeks, as the Fed has not been sending a clear signal it is ready to fight higher inflation," TD Securities said in a note.
While gold is widely regarded as an inflation hedge, elevated interest rates can curb bullion demand by increasing the opportunity cost of holding the non-yielding asset.
Fed Chairman Warsh's debut speech at the annual Jackson Hole conference this week has taken on added weight as traders and analysts look for guidance about the recent jump in bond yields and for reassurance of his independence from the Trump administration.
The U.S. Personal Consumption Expenditures report, the Fed's preferred inflation gauge, is due on Wednesday.
On the geopolitical front, Iran promised to retaliate against expanded U.S. economic sanctions that Washington said would cut off Iran's economic lifeline. Tehran expressed confidence that major trading partners would resist the pressure campaign.
Among other metals, spot silver gained 0.3% to $69.16 per ounce, platinum rose 0.4% to $1,883.93 and palladium firmed 0.2% to $1,359.00. - Reuters
