Gold bounces off two-week low, markets await US inflation data

Gold edged up on Tuesday, reversing course after hitting a two-week low earlier in the session, while focus turned to the U.S. Consumer Price Index data and Federal Reserve Chair Kevin Warsh's testimony for cues on monetary policy outlook.

Spot gold XAU= rose 0.5% to $4,021.38 per ounce by 1100 GMT, after falling to its lowest level since July 1 earlier in the session.

U.S. gold futures GCcv1 for August delivery gained 0.6% to $4,029.20.

"Gold prices are edging higher today, supported by a pause in the U.S. dollar's recent rally," said ActivTrades analyst Ricardo Evangelista.

The U.S. dollar index .DXY was down 0.2%, making dollar-priced bullion less expensive for holders of other currencies.

Investors await the June U.S. CPI data, along with Fed Chairman Kevin Warsh's first semi-annual congressional testimony, both due later in the day.

"A CPI reading above the region of 3.8% could reinforce expectations of a hawkish Federal Reserve and create a headwind for gold prices," Evangelista said.

Elevated oil prices have heightened inflation concerns, strengthening the case for the Fed to keep rates higher and reducing non-yielding gold's appeal.

Spot gold fell nearly 3% in the previous session, its biggest daily percentage drop in more than a month, as renewed hostilities between the U.S. and Iran drove energy prices higher.