Gold prices touched their highest level in two-weeks on Thursday, supported by a weaker dollar and as data showing a spike in U.S. consumer prices boosted the metal's appeal as a hedge against inflation.
Spot gold prices fell as much as 0.6% after hotter-than-expected U.S. inflation data supported the case for aggressive rate hikes, but recouped losses to trade 0.2% higher at $1,835.71 per ounce by 13:43 ET.
U.S. gold futures settled mostly unchanged at $1,837.40.
"A rising interest rate environment does nip at the heels of the gold market," said David Meger, director of metals trading at High Ridge Futures.
"However, the other side of that coin is a confirmation of the ongoing inflationary trend that we believe is the underlying fundamental push behind gold's recent move."
The dollar slipped to a near one-week low, making bullion less expensive for holders of other currencies.
While gold is considered a hedge against soaring inflation, a resultant hike in interest rates would increase the opportunity cost of holding non-yielding bullion.
The U.S. consumer price index jumped 7.5% in the 12 months through January, the biggest year-on-year increase since 1982, topping expectations of a 7.3% rise.
Federal funds rate futures increased the chances of a half percentage-point tightening by the U.S. Federal Reserve at next month's policy meeting following the data.
Meanwhile, benchmark 10-year U.S. Treasury yields topped 2% for the first time in 2-1/2 years.
"I guess with market participants now pricing in six rate hikes this year, there is some concern that it might impact economic growth down the road, and that is supporting the gold price," UBS analyst Giovanni Staunovo said.
Wall Street's main indexes dropped on Thursday, with Big Tech leading declines.
Elsewhere, spot silver gained 0.7% at $23.46 per ounce, platinum rose 0.2% to $1,035.55, while palladium fell 0.3% to $2,272.81.