Gold prices on Tuesday pared gains on news that U.S. consumer prices rose unexpectedly in November, while traders focused on key central bank policy meetings for clues on monetary policy.
Spot gold was steady at $1,978.68 per ounce, after rising about 0.5% ahead of the data release. U.S. gold futures settled little changed at $1,993.20.
The consumer price index (CPI) rose 3.1% in November on an annual basis, in line with economists' expectations. The CPI edged up 0.1% on a month-on-month basis in November.
"Inflation data was in line with the expectations, but people really needed to see a strong down tick in order to cement the those marked interest rate cuts," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
"Gold will be stuck between $2,050 on the upside and $1,950 on the downside. Weak economic data and geopolitical tension could boost prices."
All eyes turn towards the Fed's two-day monetary policy meeting that will end on Wednesday with its interest rate decision and the release of its summary economic projections.
The Fed is widely expected to leave rates unchanged this week, with about an 80% chance of a rate cut in May, CME FedWatch Tool shower.
Lower interest rates tend to support zero-yielding gold.
"If a recession does occur, the dollar could weaken and that would help to propel the gold price to new highs," Heraeus Metals said in its 2024 outlook. "Gold is forecast to trade between $1,880-$2,250."
The dollar pared losses after CPI data. A stronger dollar makes gold more expensive for other currency holders.
Traders will also keep a tab on the policy meetings of the European Central Bank and Bank of England on Thursday.