Gold firms

Gold prices inched higher on Monday on US interest rate cut optimism and brewing geopolitical tensions, while traders looked to key US inflation data due later this week for more monetary policy cues.

Spot gold rose 0.5 percent to $2,442.38 per ounce as of 0856 GMT. US gold futures gained 0.3 percent at $2,481.50.

Investors are pricing in a 49 percent chance of a 50 basis points (bps) rate cut by the Federal Reserve in September, as per the CME Group's FedWatch tool. The US producer and consumer prices numbers due on Tuesday and Wednesday will be scanned for further cues.

"The inflation point, will, in my view, define if is a 25 bps or 50 bps cut. So the outcome of the inflation data will result in some higher volatility in gold prices," UBS analyst Giovanni Staunovo said.

"For gold to reach a new record high, inflation needs to be below market expectations."

Zero-yield bullion is more appealing to investors in a low-interest rate environment.

Fed Governor Michelle Bowman on Saturday softened her usually hawkish tone ever so slightly, noting some further "welcome" progress on inflation in the last couple months even as she said inflation remains "uncomfortably above" the Fed's 2 percent goal.

Heightened geopolitical risk and volatility in other markets remains supportive for gold, Mike Ingram, market analyst at Kinesis Money, said.

"Gold's technical position appears to be more constructive than that of silver with the next major resistance level near all-time highs at $2,468," he added.