Gold prices rose on Wednesday on more signs the U.S. Federal Reserve will likely be patient on further interest rate rises, but rallying global equities kept the metal's gains in check.
Federal Reserve officials have indicated that they will support a pause in interest rate hikes from the U.S. central bank to assess its impact in economy.
"It appears that the Fed is really going to be much more dovish going forward on their expectations on interest rates," said Phil Streible, senior commodities strategist at RJO Futures in Chicago.
"The Consumer Price Index could have added a small impact, inflation seems to be muted right now and as a result gold continues to rally on that."
U.S. consumer prices were unchanged for a third straight month in January, leading to the smallest annual increase in inflation in more than 1-1/2 years, which could allow the Fed to hold interest rates steady for a while.
Lower interest rates reduce the opportunity cost of holding non-interest bearing gold and weighs on the dollar.
"A jump above $1,325 could trigger a new climb," said ActivTrades chief analyst Carlo Alberto De Casa.
"Otherwise, this lateral move could continue while investors wait for news on the ChinaU.S. trade talks and other macroeconomic data, confirming (or not) the economic slowdown forecasted for 2019/2020."
U.S. Treasury Secretary Steven Mnuchin said talks with China went well on Wednesday, as the world's two largest economies try to hammer out an agreement.
Hopes for a resolution in the prolonged trade spat helped extend a week-long rally in world stock markets on Wednesday.
While major gold Exchange Traded Funds (ETF) tracked by Reuters have eased more than 1 percent, mirroring a slight pullback in gold since the start of this year, the ETFs have risen about 5 percent since mid-August, tracking a roughly 13 percent gain in gold in the same period.
However, inflows into the SPDR Gold Trust, the world's largest gold-backed ETF, continued to drop, down about 3 percent so far this month after four straight monthly gains.
"This reflects an improving sentiment in financial markets overall, which is a little bit of a drag on gold," Julius Baer analyst Carsten Menke said.
"Yet I would not expect these outflows to continue given there is an overall consensus that gold is in a longer term uptrend."
Elsewhere, palladium slipped 0.36 percent to $1,398 per ounce.