Gold Rebounds Above $4,550 on Weaker US Dollar

• Gold price rebounds to near $4,565 in Tuesday’s early Asian session. 
• The US Dollar Index drops to its session lows, which supports the USD-denominated commodity price. 
• Traders have largely priced ‌out US interest rate cuts this year, while expectations for a hike have risen. 

Gold price (XAU/USD) recovers some lost ground from a one-and-a-half-month low to around $4,565 during the early Asian session on Tuesday. The precious metal edges higher amid a weaker US Dollar (USD). However, the potential upside might be limited as the Iran war fueled inflation concerns and expectations of tighter monetary policy.

The USD declines against most major currencies as traders evaluate whether progress in ‌ending the Iran war is likely in the near term. "The U.S. dollar index dropped to its session lows - that's a friendly element for the gold market," said Jim Wyckoff, market analyst at American Gold Exchange.

On the other hand, higher energy prices driven by the Iran war stoked inflation fears and reinforced expectations of US Federal Reserve (Fed) rate hikes. It’s worth noting that Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.

Traders are pricing in a 35.0% probability that the Fed will raise interest rates by 25 basis points (bps) by year-end, according to the CME FedWatch tool.