Gold climbs as investors look ahead to key U.S. inflation data

Gold prices dipped on Wednesday as the dollar edged up, while market participants assessed the timeline for potential U.S. interest rate cuts and were on the lookout for fresh cues for further clarity on monetary policy.

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Gold prices gained on Wednesday, as investors awaited a key U.S. inflation data later this week, which could provide more clues on the Federal Reserve's policy path.

Spot gold was up 0.5% at $2,189.89 per ounce. U.S. gold futures settled 0.6% higher at $2,212.7.

The U.S. Core Personal Consumption Expenditures Price Index (PCE) data for February is due on Friday. The index rose 0.3% in January.

"We'll have to see whether or not U.S. inflation here domestically is soft enough to provide this clear path to lower rates in the coming months," said Alex Turro, senior market strategist at RJO Futures.

He expects range-bound price action for the session as investors come on the sidelines ahead of the report.

Gold hit a record high last week after the U.S. Fed anticipated three rate cuts in 2024 despite recent high inflation readings.

Traders see a 70% chance of a June rate cut from the Fed .

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

"Central banks continue to report ongoing gold purchases, driven by their desire to diversify their currency reserves. This is offsetting the weakness from investment demand, which focuses more on U.S. rate-cut expectations," said UBS analyst Giovanni Staunovo.

Meanwhile, gold imports by India, the world's second-biggest consumer of the precious metal, are set to plunge by more than 90% in March from the previous month, as banks cut imports after record-high prices hit demand.

Spot silver was up 0.6% at $24.56 per ounce, platinum lost 0.9% to $894.85 and palladium fell 0.7% to $986.31.