Gold prices jumped on Wednesday as signs of cooling inflation bolstered bets that the U.S. Federal Reserve may pause its policy tightening after a likely interest rate hike in May.
Spot gold was up 0.6% at $2,014.39 per ounce by 2:10 p.m. EDT (18:10 GMT), after rising as much as 1.3% earlier. U.S. gold futures settled 0.3% higher at $2,024.90.
The Consumer Price Index climbed 0.1% in March after advancing 0.4% in February. But in the 12 months through March, the core CPI gained 5.6%, after rising 5.5% on the same basis in February.
"The risks of not raising rates enough far exceeds over-tightening so the Fed is probably going to go forward with the quarter-point rate hike, the core justifies it," said Edward Moya, senior market analyst at OANDA.
"There's still a tremendous amount of risk on the table, so gold should still see some strong flows headed its way."
Gold drew strength from a slide in the dollar and benchmark U.S. yields.
Markets are now pricing in a 69% chance of a 25-basis-point rate hike in the May meeting, followed by 2-to-1 bets of a pause in June.
While gold is seen as a hedge against inflation, higher rates to tame rising price pressures weigh on the non-yielding asset's appeal.
Several officials at the Fed's meeting last month considered pausing interest rate increases over concerns of wider financial stress from the failure of two U.S. regional banks, but they concluded that high inflation remained the priority, minutes showed.
Whether the Fed will slow its rate hikes "largely depends on the confirmation of economic cooling indicators, such as a potential deterioration in the US job market," said Alexander Zumpfe, a precious metals dealer at Heraeus.
Silver gained 1.5% to $25.45 per ounce, platinum added 2.5% to $1,019.22 and palladium rose 1.6% to $1,469.52.