Gold prices have climbed to their highest level in a week, supported by bargain-hunting activity.
Traders are closely monitoring developments in the Middle East for signs of how energy prices might impact inflation.
The price of gold rose as much as 1.9%, surpassing $4,080 per ounce, following a 0.2% decline in the previous session.
This move comes after U.S. forces launched a new round of airstrikes on Iranian targets, with the U.S. President vowing that Tehran would pay a price for the killing of three American soldiers.
Iran-backed Houthi rebels in Yemen have threatened a maritime blockade of the Red Sea against Saudi Arabia.
The Saudi-led coalition stated it would respond firmly to the Houthi threat and had taken measures to protect vessels navigating the Red Sea.
Despite the escalation, Iranian sources indicated that mediators have been in contact with Tehran regarding proposals to de-escalate hostilities with the United States.
Reports suggest mediators have proposed a 10-day ceasefire between Iran and the U.S.
Despite the recent resurgence of conflict, gold has shown some signs of finding support around the psychologically significant $4,000 per ounce level, with dip-buying activity also noted last week.
However, Christopher Wong, an analyst at OCBC, noted that unless oil prices retreat and market expectations for further monetary tightening by the Federal Reserve cool, the upside for gold may remain limited.
He added that daily momentum indicators currently do not show a clear directional signal.
As of 3:18 PM Singapore time, spot gold was up 1.6% at $4,072.59 per ounce.
The Bloomberg Dollar Spot Index was down 0.1%.
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