Gold prices fell to a two-week low on Tuesday, as the conflict between the United States and Iran in the Gulf sent oil prices sharply higher and fueled inflation concerns. Spot gold dropped 0.2 percent to $3,993.83 per ounce after losing about 3 percent in the previous session, its biggest daily percentage decline in more than a month. U.S. gold futures for August delivery settled at $4,000.70.

According to Reuters news agency, oil futures hit their highest level since mid-June, after jumping about 9 percent in the previous session, while U.S. Treasury yields and the dollar rose as the conflict between the United States and Iran resumed earlier this week.

Investors are closely watching U.S. consumer price index data for June, due later on Tuesday, for fresh clues on inflation and the path of the Federal Reserve's interest rate policy.

Federal Reserve Governor Christopher Waller said on Monday that the central bank may need to raise interest rates 'in the near term' if upcoming data show inflation remaining well above the 2 percent target, describing monetary policy as being at a 'crossroads'.

The CME FedWatch tool showed expectations of around 78 percent for a rate hike, up from 57 percent a week earlier.

Among other precious metals, spot silver fell 1.2 percent to $56.98 per ounce after touching a two-week low earlier. Platinum dropped 1 percent to $1,589.35, while palladium edged down 0.4 percent to $1,242.54.