Gold prices fell on Tuesday as investors monitored a fragile ceasefire between the U.S. and Iran, while also awaiting a meeting between Donald Trump and Chinese President Xi Jinping later this week.

Spot gold slipped 0.8% to $4,699.16 an ounce by 05:56 ET (09:56 GMT), while U.S. gold futures fell 0.5% to $4,707.20 an ounce.

Among other precious metals, spot silver dropped 2.6% to $83.90/oz, while platinum slid 2.7% to $2,078.23/oz.

Trump said that Iran’s response to a U.S.-backed peace proposal was a “piece of garbage” and warned that the ceasefire risked collapsing after weeks of indirect negotiations. He described the truce as being on “massive life support,” adding to fears of renewed escalation in the Gulf region.

Iran, meanwhile, said its armed forces were prepared to respond decisively to any “act of aggression.” Iranian officials insisted that Tehran’s demands -- including sanctions relief, restoration of oil exports, and recognition of its sovereignty over the Strait of Hormuz -- were legitimate. 

Oil prices remained elevated on Tuesday on concerns over possible supply disruptions through the Strait of Hormuz, a key artery for global crude shipments.

Higher oil prices have capped gains in bullion, as investors worry that a sustained rise in energy costs could fuel inflation and prompt the Federal Reserve to keep interest rates elevated for longer. Higher interest rates tend to reduce the appeal of non-yielding assets such as gold.

At the same time, the U.S. dollar has firmed, with traders viewing the greenback as a relative safe haven during the broader geopolitical uncertainty. The American economy’s role as a major energy exporter could also help insulate the country from a broader energy shock, some analysts have suggested, further denting gold. A stronger dollar can make the yellow metal more expensive for overseas buyers.  

"Gold’s safe-haven appeal tends to perform best in a financial crisis or growth shock -- when real yields fall and the dollar weakens. A supply-driven energy shock does the opposite," analysts at ING said in a note.

Markets were also focused on Trump’s expected meeting with Xi in Beijing later this week, where discussions are expected to revolve around Iran, Taiwan, trade tensions, artificial intelligence and energy security.

Attention is also turning to upcoming U.S. inflation data, particularly the consumer price index report due on Tuesday, for clues on the impact of the Iran war and the path ahead for the Federal Reserve’s interest rate policy.