Gold rose on Tuesday as diplomatic efforts to ease U.S.-Iran tensions boosted hopes of lower oil prices and a less hawkish Federal Reserve. Spot gold gained 1.7% to $4,071.32 per ounce, while U.S. gold futures for August delivery rose 1.5% to settle at $4,076.40.

A senior Iranian official said Tehran received a proposal for a 10-day ceasefire to salvage the interim deal. "Commodities are higher across the board on expectations that a cease-fire in the Middle East could be in the works," said Marex analyst Edward Meir. Gold also drew support from technical buying after breaking above a short-term downtrend since July 6.

Elevated oil prices from Gulf supply disruptions have weighed on gold by stoking inflation fears and bets on higher-for-longer interest rates. High rates raise the opportunity cost of holding non-yielding bullion. Investors await the Federal Reserve's rate decision and Chair Kevin Warsh's comments next week, with traders pricing in a 64% chance of a September hike per the CME Fed Watch Tool.

"The psychologically significant $4,000 mark appears to be holding firm... However, interest rate concerns in the U.S. are likely to put the brakes on a stronger recovery," Commerzbank said in a note.