Gold bounced off a one-week low on Tuesday, lifted by a softer dollar, while investors braced for a key U.S. inflation report that is expected to influence the Federal Reserve's monetary policy stance.
Spot gold rose 0.6% to $1,677.70 per ounce, after rising about 1% earlier in the session. U.S. gold futures settled 0.6% higher at $1,686.00.
The dollar was down about 0.3% against its rivals, making greenback-priced bullion slightly less expensive for overseas buyers.
Benchmark U.S. 10-year Treasury yields gave up gains from earlier in the day, helping demand for zero-yield bullion.
However, "a lot of the day-to-day price action is pretty much noise at this point," as the market is still very much waiting to see how the inflation data and Fed minutes play out heading into the next Fed meeting, said Ryan McKay, commodity strategist at TD Securities.
Thursday's U.S. inflation reading is expected to remain stubbornly high and cement the Fed's hawkish rhetoric on monetary policy.
"Gold has actually held up quite strong against the rise in real interest rates, so, I think there is some catch up to the downside there," McKay added.
Rising U.S. interest rates increase the opportunity cost of holding gold, which bears no interest.
Looking ahead, "it's hard to create a bullish case for gold", considering peak inflation may be yet to come, with rate hikes likely to continue until such a scenario, said Craig Erlam, senior market analyst at OANDA.
Silver fell 1.2% to $19.42 per ounce, platinum firmed 0.2% to $900.35, and palladium dropped 1.1% to $2,148.08.
Citi analysts said in a note they were relatively bullish on palladium, citing resilient demand on increasing automotive chip supply availability, automotive supply chain re-stocking and rising Russian supply risks.