Gold prices edged up on Wednesday as investors sought bargains after steep declines in the previous session, while the spotlight shifted to U.S. inflation data, which could shed more light on the Federal Reserve's path for monetary policy.
Spot gold firmed 0.4 per cent to US$2,606.42 per ounce by 0733 GMT, after hitting its lowest since Sept. 20 on Tuesday. U.S. gold futures rose 0.2 per cent at US$2,612.30.
"There is currently some bargain hunting as prices fell below the $2,600 mark," said Kelvin Wong, OANDA's senior market analyst for Asia Pacific. "Recent sessions saw gold negatively impacted due to a stronger dollar, driven by expectations of inflationary policies by (U.S. President-elect) Donald Trump affecting the rate cut cycle." Traders see a 62 per cent chance of a 25 basis points cut at the Fed's December meeting, versus 77.3 per cent a week ago, according to the CME's FedWatch Tool.
Gold is a hedge against inflation, but higher rates dampen its appeal as it yields no interest.
U.S. Consumer Price Index (CPI) data is due at 1330 GMT, and if it shows the inflation trend is contained, gold could test US$2,650, Wong said.
Besides that, U.S. Producer Price index (PPI) and weekly jobless claims are due on Thursday, and retail sales data is expected on Friday. Remarks from Fed Chair Jerome Powell and other U.S. central bank officials are also on investors' radar.
The Fed's policy rate continues to act as a brake on the resilient labor market and on inflation that is still above the 2 per cent target, two U.S. central bankers said on Tuesday.
"Trump's plans to continue tax cuts beyond 2025 and to increase spending will likely deteriorate the U.S. fiscal situation and this could pave the way for macroeconomic policy adjustments that would support gold," ANZ said in a note.
Spot silver rose 0.5 per cent at US$30.86, platinum added 0.4 per cent to US$951.10 and palladium gained 0.6 per cent at US$949.70.