Gold managed to extend gains on Tuesday, capitalising on a pullback in oil prices to recover some of the ground lost since the outbreak of the Middle East conflict. Advances remained modest, however, as investors held back ahead of fresh US inflation data that could reshape their portfolio positioning.

The yellow metal was trading up 0.41% at $4,188.81 per ounce in morning trading, having briefly surged around 0.7% overnight to breach the $4,200 mark. Because gold carries no yield, it tends to benefit from a restrictive monetary policy environment — and markets are currently not pricing in a Federal Reserve interest rate increase this month.

The September consumer price index reading, due for release on Wednesday, is expected to be “sufficiently moderate for the Fed to keep rates unchanged”, according to analysts at Bloomberg Economics. However, the producer price index and import prices are likely to “reflect continued pressure from energy and imported goods”, they added.

Economists anticipate September inflation will accelerate to 3.7% year-on-year, up from 3.4% the previous month. On a monthly basis, the consumer price index is forecast to rise 0.6%, following a 0.4% gain in August. Any reading above or below expectations could have a significant impact on gold trading.