Gold firmed on Wednesday as data showing U.S. inflation was within expectations dented the dollar and prompted buying from investors who seemed to have priced in the Federal Reserve's likely interest rate hike trajectory.
Spot gold was last up 0.2% at $1,825.83 per ounce, extending gains after rising the most since mid-December on Tuesday. U.S. gold futures settled up 0.5% at $1,827.3.
The dollar fell to a two-month low after data showed U.S. inflation posted its largest annual rise in nearly four decades, making gold more attractive for overseas investors. The U.S. benchmark 10-year yields also slipped.
Standard Chartered analyst Suki Cooper said gold prices have held up "remarkably well" even as the market continues to look for the first Fed rate hike in March.
"Historically, gold has tended to price in rate hikes early. Price action suggests that the market has priced in rate-hike headwinds and the scope for near-term USD strength."
While gold is considered a hedge against soaring inflation, a resultant hike in interest rates translates into increased opportunity cost of holding non-interest bearing bullion.
But the building inflationary pressures are likely to keep gold supported in the coming weeks, pushing it above technical resistance around $1,830, said David Meger, director of metals trading at High Ridge Futures.
Capping gold's advance were gains on Wall Street as the inflation figures eased some concerns about faster-than-expected interest rate hikes.
"Gold seems like it is in a good place as Treasury yields won't be rallying much higher until financial markets have balance sheet runoff certainty and that won't happen until at least a couple more Fed meetings," Edward Moya, senior market analyst at brokerage OANDA, said in a note.
Spot silver was up 1.7% at $23.16 an ounce, platinum gained 0.9% to $979.39, while palladium dipped 0.5% to $1,911.09.