Gold prices slipped on Wednesday as investors stayed on the sidelines ahead of key U.S. inflation data that could offer more cues on the Federal Reserve's stance on monetary policy.
Spot gold was down 0.5% at $1,915.98 per ounce, the lowest since July 10. U.S. gold futures settled 0.5% lower at $1,950.60 per ounce.
"Tomorrow's CPI will be a pivot point for Fed policy ... it's kind of wait-and-see mode now," said Daniel Pavilonis, senior market strategist at RJO Futures.
"Gold has been this inflationary kind of hedge also, but it is fighting an uphill battle with a 10-year yield. Gold will likely struggle if inflation is still there and the Fed is looking to raise rates too fast," Pavilonis added.
U.S. consumer price index (CPI) data, due on Thursday, is expected to show inflation slightly accelerated in July to an annual 3.3%.
Most traders expect no change from the Fed at its policy meeting in September. There is just a 13.5% chance of a quarter-point rise, according to the CME's FedWatch Tool.
"For a sustained recovery (in gold), we believe the market will need to see increased certainty on 2024 U.S. rate cuts," said Baden Moore, head of carbon and commodity strategy at National Australia Bank.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar.
Offering some respite to gold, the dollar fell 0.1% against its rivals after data showing the Chinese economy slipped into deflation last month lifted hopes for more stimulus.
Spot silver eased 0.4% to $22.67 an ounce and platinum slipped 1.1% to $890.34, while palladium gained 1.2% to $1,234.47.