• Gold prices trades higher on the pullback in US Dollar (USD).
• US Dollar (USD) looks to recover from the recent losses on the back of upbeat US bond yields.
• Precious metal is expected to trade sideways if the forthcoming US data shows a moderation in its trends.

XAU/USD attempts to extend gains on the second day, hovering around $1,921 during the early hours of the Asian session on Tuesday. The pair is experiencing upward support due to the pullback in the US Dollar (USD). However, the positive performance of US Treasury yields could be constraining the gains of the precious metal.

US Dollar Index (DXY) beats lower around 104.60, struggling to snap losses on the back of the positive performance of United States (US) bond yields. The yield on the 10-year US Treasury bond improved to 4.30% at the time of writing.

Strong economic releases in August exerted downward pressure on Gold prices. Although the labor market had shown deterioration in the past few weeks, it recently experienced a setback with two robust reports including the ISM Services PMI and Initial Jobless Claims, both surpassing market expectations. As long as the data continues to display a mixed outlook, market participants can expect the prices to consolidate.

Investors will likely watch the upcoming release of the US Consumer Price Index (CPI) data for August as it holds considerable significance before the September monetary policy meeting of the US Federal Reserve (Fed).

This data has the potential to offer additional insights into the country's inflation scenario, which can significantly influence the investors’ outlook on the USD.

During the past week, Fed policymakers expressed strong support for maintaining the current policy stance on September 20. This stance is driven by declining inflation and a loosening labor market.

However, the appeal of Gold prices may be tempered in anticipation of a robust performance by the US Dollar (USD). The Greenback is anticipated to remain strong by absorbing the effects of higher interest rates more effectively. Moreover, the currency can be reinforced by further positive economic data from the US.

Investors have been pricing in the probability of a 25 basis points (bps) interest rate hike by the Fed, expected to occur in either the November or December meetings. This more hawkish tone has the potential to restrict the upward potential for Gold prices.