Spot gold was modestly higher on Wednesday after the U.S. Federal Reserve announced that it would stay on course with its plan to trim its bond-buying program.
The Fed slashed its forecast for U.S. economic growth this year but expressed confidence the recovery was largely on track and would allow it to begin raising interest rates in 2015.
It reduced its monthly asset purchases from $45 billion to $35 billion a month, divided between $20 billion of Treasury securities and $15 billion of mortgage-backed debt.
Spot gold was last up 0.2 percent at $1,273 an ounce after closing unchanged in the previous session. for August delivery settled 70 cents higher at $1,272.70 an ounce.
The dollar edged lower against a basket of currencies, but was underpinned by the strong inflation figures.
A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.
Gold hit a three-week high of $1,284.85 on Monday due to market volatility sparked by violence in Iraq, but prices have dropped since then. Gold is up 1.6 percent so far in June.
Reflecting bearish investor sentiment towards bullion, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.26 ton to 782.62 tons on Tuesday, a second straight day of declines.
The fund, considered a proxy for investor sentiment, posted its biggest outflow since mid-April on Monday.
Physical markets in Asia also remained weak.
In top buyer China, gold prices traded either at a discount of about $1 an ounce or on a par with the global benchmark, in a sign that buying interest was weak.
Gold premiums in India—the world's No. 2 gold buyer—fell to their lowest in four months as wedding demand cooled off.
—By Reuters. For more information on precious metals, please click here.