Gold prices traded higher during Wednesday's Asian session, although buyers remained cautious as the conflict in the Middle East continued to widen.
By 4:15 pm AEST (6:15 am GMT), spot gold was trading 1.1% higher at US$4,401.82 an ounce.
The United States dollar remained near two-week lows amid renewed demand for the Japanese yen, with expectations of an aggressive tightening cycle from the Bank of Japan providing support for the local currency and weighing on the USD/JPY pair and the greenback.
However, downside risks for the U.S. dollar could be limited by the widening Middle East conflict, which has kept oil prices elevated and fuelled concerns about inflation.
U.S. Central Command (CENTCOM) said it destroyed five Iranian crude oil carriers on Tuesday, describing the action as a response to Iran's Islamic Revolutionary Guard Corps (IRGC) targeting a U.S. Navy warship with ballistic missiles twice over the previous two days.
Looking ahead, gold remains exposed to two-way risks as investors await U.S. Consumer Price Index (CPI) data later in the week, which could influence expectations for the Federal Reserve's interest-rate path.
