Gold prices hit a two-week high Tuesday, underpinned by rising geopolitical tensions and expectations of a third U.S. rate cut by the Federal Reserve next week, while the market's gaze shifted to Wednesday's U.S. inflation data.

Spot gold was up 1.1% to $2,687.69 per ounce at 9:35 a.m. ET (1435 GMT). U.S. gold futures were up 1% at $2,712.10.

"Concerns of heightened tensions in the Middle East are fostering safe haven bids," said Peter Grant, vice president and senior metals strategist at Zaner Metals.

There is "also a kind of renewed focus on the global easing trend - we'll see the Bank of Canada cut rates, ECB and SNB later this week, and the Fed most likely next week."

The spotlight is moving to the U.S. Consumer Price Index (CPI) on Wednesday, which is expected to rise by 0.3% in November, according to a Reuters poll, and the Producer Price Index (PPI) on Thursday, both pivotal in shaping the Fed's rate-cut decisions.

"The CPI data will have limited impact on gold, especially if we get a print around the expected figure. A hot CPI report will reduce the odds of rate cuts in early 2025 further," said Fawad Razaqzada, market analyst at Forex.com.

With two U.S. rate cuts so far this year, traders predict an 86% chance of a further 25-basis-point cut at the Fed's Dec. 17-18 meeting, according to the CME FedWatch tool.

Gold is considered a safe investment during economic and geopolitical turmoil and tends to thrive in a lower interest rate environment.

Elsewhere, China will adopt an "appropriately loose" monetary policy and a more proactive fiscal approach next year, its Politburo was quoted as saying on Monday.

"Any big announcements should give gold a boost since China is the largest consumer nation, and especially ahead of the Lunar New Year celebrations when jewelry demand for gift-giving rises," Razaqzada added.

Spot silver added 0.6% to $32.00 per ounce, platinum fell 0.4% to $935.55 and palladium was down 0.6% at $968.00.