Gold prices lifted on Tuesday, capitalising on geopolitical uncertainties and expectations of further economic stimulus from China, reversing some losses incurred last week.
By 3:50 pm AEDT (4:50 am GMT) spot gold added $10.16, or 0.4% to US$2,670.33 per ounce.
The precious metal benefited from a pause in rising U.S. Treasury yields and a weaker inflation outlook from China, where November's consumer price index (CPI) rose by only 0.2% year-on-year, down from 0.3% in October.
This data prompted an announcement from China, which plans to implement its first "appropriately loose" monetary policy in 14 years and adopt more proactive fiscal measures next year to boost economic growth, according to the Politburo's statement on Monday.
Meanwhile, the sudden collapse of the Syrian government has also bolstered safe-haven demand for gold. Over the weekend, Syrian rebels captured Damascus, forcing President Bashar al-Assad to flee to Russia.
On Monday, gold prices rebounded from an eight-day low of $2,613, buoyed by the geopolitical turmoil, even as the U.S. dollar and Treasury bond yields gained strength.
The yield uptick was driven by expectations of persistent inflation in the U.S., prompting speculation of a hawkish Federal Reserve stance at its upcoming meeting.
Markets currently assign an 85.8% probability of a 25 basis point rate cut by the Federal Reserve next week, according to the CME Group’s FedWatch Tool.
In the meantime, geopolitical developments, particularly in the Middle East, are likely to drive sentiment in the absence of any major economic data scheduled for release on Tuesday.