Gold rose on Tuesday after hitting a two-week low earlier in the session, as markets awaited key US inflation data, with escalating US-Iran tensions driving oil prices higher and reinforcing expectations of further Federal Reserve rate hikes. Spot gold was up 0.5% at $4,021.62 per ounce by 0440 GMT, recovering from its lowest level since July 1. US gold futures for August delivery gained 0.6% at $4,028. Gold shed about 3% in the previous session, its biggest daily percentage decline in more than a month, as continued fighting between the US and Iran drove oil prices to a one-month high. While gold is often viewed as a hedge against inflation, higher rates tend to weigh on the non-yielding metal by increasing the appeal of interest-bearing assets. "You have a situation where the markets probably don't want to commit. They have a big batch of event risks in front of them. There's, of course, the Warsh testimony and then the CPI print, so there's a lot for people to look at in addition to the headlines out of the Middle East," said Ilya Spivak, head of global macro at Tastylive. Investors will closely watch June US CPI data due later in the day for fresh clues on inflation and the Fed's policy path, with PPI data and Fed Chair Kevin Warsh's first semi-annual testimony before Congress this week also in focus. The US central bank may need to raise interest rates "in the near term" if coming data show inflation continuing well above the 2% target, Fed Governor Christopher Waller said on Monday. Traders have ramped up bets on a September US interest rate hike, with CME Group's FedWatch Tool showing the probability rising to around 76% from 57% a week ago. Elsewhere, spot silver inched 0.1% higher to $57.70 per ounce, having earlier touched a two-week low. Platinum fell 0.1% to $1,603.72 and palladium rose 1.4% to $1,264.61.
