Gold prices are holding onto steep losses as the ongoing standoff between the United States and Iran in the Strait of Hormuz keeps energy costs elevated, adding upward pressure on the Federal Reserve to raise interest rates.
Bullion traded around $4,125 per ounce after falling 4% on Monday to a seven-week low.
Oil prices climbed as Iranian officials privately expressed pessimism about reaching a deal with Washington to end hostilities before the U.S. midterm elections in November, while Trump had earlier rejected Iran's latest proposal to reopen the Strait of Hormuz.
Gold has dropped roughly 7% in September after the Fed hiked rates for the first time since 2023 to combat inflation and signaled that further increases may lie ahead.
Stubbornly high energy prices are also adding to the case for tighter policy, with investors now pricing in about a 70% chance of a rate hike in October.
Markets will closely watch Wednesday's personal consumption expenditures data and Friday's nonfarm payrolls report for the next clue on the direction of interest rates.
Spot gold rose 0.2% to $4,126.52 per ounce.
Silver gained 0.2% to $60.77 per ounce after tumbling nearly 6% in the previous session.
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