Gold prices edged higher on Monday, reversing earlier losses, but gains were capped and the overall mood remained one of caution after a diplomatic setback between the U.S. and Iran and ahead of key inflation data later this week. 

At 16:28 ET (20:28 GMT), spot gold was up 0.4% to $4,734.84/oz, while gold futures added 0.3% to $4,744.81/oz.

The U.S. dollar firmed slightly on Monday, boosted by safe have demand following a diplomatic setback between Washington and Tehran. Traders were also cautious ahead of key U.S. inflation data this week that could show a big impact of surging oil prices.

At 15:43 ET (19:43 GMT), the U.S. dollar index, which tracks the greenback against a basket of six major peers, was up 0.1% to 97.96.

Bitcoin has surged past the significant psychological barrier of $80,000, and was trading up 0.54% at $80,690 as of 06:14 ET (10:14 GMT) as digital assets benefited from the risk-on market sentiment and renewed legislative activity. 

According to a report from CoinDesk, the crypto industry is currently cheering the announcement of a Senate Banking Committee markup date for the CLARITY Act. 

Gold is turning slightly lower after the recent rebound, which unfolded in a corrective manner with a three-wave move into the 4661 area. Now price is trying to break the lower trendline of the corrective channel, which suggests that more weakness could be ahead.