Gold prices rose during Tuesday's Asian session, recovering from a two-day decline that followed last week's all-time high.
The rebound, however, was tempered by the modest strength of the U.S. dollar (USD), buoyed by remarks from Federal Reserve Chair Jerome Powell.
By 3:00 pm AEST (5:00 am GMT) spot gold prices were up 0.2% to $2,640.3.
Despite the headwinds, a significant decline in gold prices seems unlikely due to ongoing geopolitical risks stemming from the conflict in the Middle East.
In the region, tensions have escalated as Israeli forces conducted targeted raids in Lebanon following the death of Hezbollah leader Hassan Nasrallah in an Israeli airstrike.
This development has intensified the broader crisis, with Israel rejecting a ceasefire proposal by the U.S. and France, which called for a 21-day truce to allow for diplomatic talks and the return of displaced civilians.
Market expectations of continued easing in U.S. inflation have also led to forecasts of further interest rate cuts by the Federal Reserve.
Investors now await key U.S. macroeconomic data this week, including the ISM Manufacturing PMI and JOLTS Job Openings, for indications of future economic trends at the beginning of the new month.