Gold prices edged lower to around $4,120 per ounce on Tuesday, giving back part of the previous session’s gains as investors awaited a key US inflation report that could shape expectations for Federal Reserve monetary policy. Markets are now pricing in an 84% probability of a Fed rate hike in December as policymakers continue to face persistent inflationary pressures, up from roughly 74% a week earlier.

Higher interest rates raise the opportunity cost of holding non-yielding assets such as gold, making the precious metal less attractive to investors. Meanwhile, bullion gained nearly 2% on Monday as oil prices plunged amid growing optimism over a potential peace agreement between the US and Iran. President Donald Trump expressed confidence that the conflict in Iran was approaching an end following discussions with Qatar’s prime minister. Lower crude prices could help ease inflationary pressures, potentially reducing the need for further monetary policy tightening.