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Gold prices held firm above the $2,500 level on Tuesday as market participants positioned themselves ahead of U.S. inflation data for further clues on the depth of interest rate cuts by the Federal Reserve next week.

Spot gold rose 0.3% to $2,513.07 per ounce. U.S. gold futures were up 0.4% at $2,542.10.

"Gold prices are trading in an extremely tight range, waiting for the next catalyst, which are likely to be both the U.S. presidential debate tonight, followed shortly by inflation data tomorrow," said Daniel Ghali, commodity strategist at TD Securities.

The investors will closely scan through U.S. Consumer Price Index data on Wednesday and the Producer Price Index reading on Thursday.

The CPI for August is expected to have risen by 0.2% month-over-month, unchanged from the previous month, according to a Reuters poll.

"Spot gold remains supported above the psychological $2,500 level, and any post-CPI forays below that big, round number should see bulls buying the dip once more, as they have consistently done since mid-August," said Han Tan, chief market analyst at Exinity Group.

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