Gold prices edged higher on Tuesday as the dollar slipped, with investors positioning for a U.S. inflation report that could influence the Federal Reserve’s interest rate strategy.

Spot gold was up 0.5% at $1,861.91 per ounce after falling to its lowest since early January in the previous session. U.S. gold futures rose 0.4% to $1,870.50.

“Gold prices are seeing a modest rebound off 1-month lows as U.S. yields and the dollar slip back ahead of this afternoon’s January CPI report,” said Michael Hewson, chief market analyst at CMC Markets.

“A strong CPI number could see further weakness in gold prices.”

January’s U.S. consumer price index (CPI) data is due at 1330 GMT and a Reuters poll forecast the headline CPI figure to rise 0.5%.

The dollar index fell 0.3%, making greenback-priced bullion more affordable for buyers holding other currencies. Benchmark 10-year U.S. Treasury yields dipped for the second straight session.

If inflation remains high, it could potentially give the Fed enough impetus to maintain its hawkish rhetoric, said Navneet Damani, senior vice president, commodity research at Motilal Oswal Financial Services.

Although bullion is considered an inflation hedge, it is highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding the zero-yield asset.

The Fed will need to continue to raise rates to get them to a level high enough to bring inflation back down to the central bank’s target rate, Fed Governor Michelle Bowman said on Monday.

Markets now expect Fed’s target rate to peak at 5.188% in July, from a current range of 4.5% to 4.75%.