Gold prices eked out gains on Tuesday despite a stronger dollar and higher bond yields, as investors looked forward to the US June inflation data due later this week for more clarity on the US interest rate path.

Spot gold rose 0.2 percent to $2,363.64 per ounce as of 14:35 p.m. ET (1835 GMT), after dropping more than 1 percent in the previous session. US gold futures settled about 0.2 percent higher to $2,367.90.

The dollar was up about 0.2 percent against its rivals, making gold more expensive for other currency holders, while benchmark 10-year Treasury yields inched higher.

There's an expectation that the Federal Reserve is more likely to start cutting rates as early as September, which is contributing positively to current market conditions, said Bart Melek, head of commodity strategies at TD Securities.

Recent US economic data pointed to a slackening labour market, cementing expectations that the US central bank is on course to start cutting interest rates soon.

However, Fed Chair Jerome Powell said in congressional testimony on Tuesday that inflation remains above the Fed's 2 percent target, but has been improving in recent months and more good data would strengthen the case for central bank interest rate cuts.

Focus now shifts to the consumer price index (CPI) data on Thursday, with recent numbers showing a cooling from unexpectedly high levels at the start of the year.

If markets are shown evidence of still-stubborn US inflation, that may prompt the precious metal to unwind more of its recent gains, said Han Tan, chief market analyst at Exinity Group.

Traders currently see about a 75 percent chance of a rate cut in September, according to the CME Group's FedWatch Tool. Non-yielding bullion's appeal tends to grow when interest rates are lower.