Gold prices edged higher on Wednesday as the dollar and Treasury yields retreated ahead of key U.S. inflation data that could determine the Federal Reserve's rate hike trajectory.
Spot gold was up 0.2% at $1,935 per ounce in early trading. U.S. gold futures also rose 0.2% to $1,940.50 an ounce.
The dollar index fell 0.3% to its lowest since May 11, making gold cheaper for holders of other currencies. Benchmark 10-year U.S. Treasury yields also slipped, boosting the appeal of non-yielding bullion.
Investors awaited the June U.S. consumer price index report due later in the day. Economists forecast a 3.1% rise in June, compared to 4% in May. Any moderation in inflation pressures, especially the core inflation rate that excludes volatile food and energy costs, could influence expectations for more dovish policy moves by the Fed.
Some Fed members said this week the central bank is close to ending rate hikes but still has work to do on inflation. Markets see a 92% chance of a 25 basis point hike at the July FOMC meeting.
While a July hike is priced in, analysts said core inflation above estimates could revive bets on a September rate hike. Higher rates raise the opportunity cost of holding gold.
In other precious metals, silver rose 0.1% to $23.14 per ounce. Platinum gained 0.4% to $928.05 while palladium fell 0.1% to $1,250.29.
