Gold held its recent recovery from around US$4,300 during Asian trading on Monday, hovering near the key US$4,400 level as a weaker United States dollar and fading expectations of a Federal Reserve interest rate hike offset renewed Middle East tensions.
By 3:35 pm AEST (5:35 am GMT), spot gold was trading 0.5% higher at US$4,397.75 an ounce.
Gold has benefited from renewed weakness in the U.S. dollar as markets have continued to reduce expectations of a Fed rate hike in September following softer U.S. inflation and retail spending data, as well as a decline in consumer sentiment.
ANZ analysts commented in a note to clients: "Recent data suggest hawkish market pricing may have peaked, while breakeven inflation expectations remain anchored near 2%.
"Softer hiring trends, evidence that the labour market is a disinflationary force and cooling inflation have helped gold find support near USD4,000/oz.
"The joint intervention by the U.S. and Japan to support the JPY has raised questions about the reliability of traditional haven currencies.
"This has again put the spotlight on gold as a reserve asset and hedge against currency devaluation."
The University of Michigan's (UoM) Surveys of Consumers reported on Friday that its Consumer Sentiment Index fell to 51.0 in August from 55.2 in July, ending two consecutive months of improvement.
Markets are currently pricing in a 30.1% probability that the Fed will raise interest rates next month, down from roughly 52.2% a week ago, according to the CME Group FedWatch Tool.
However, uncertainty remains amid the U.S.-Iran conflict and the reopening of the Strait of Hormuz, with neither side reporting progress in talks aimed at reviving the interim agreement reached in June.
