Gold prices ticked up on Wednesday after a nearly 3% slide in the previous session, but gains were limited as stronger-than-expected US inflation data cemented expectations of a Federal Reserve interest rate hike next month, weighing on bullion.
Spot gold rose 0.6% to $4,057.33 per ounce at 0637 GMT after falling nearly 3% to $4,017.21 on Tuesday. US gold futures for December delivery gained 0.9% to $4,065.40.
"We're seeing a technical retracement against Tuesday's heavy losses, as bears book profits and wait for the next catalyst. Hot CPI and hawkish Fed comments have revived tightening expectations," said Matt Simpson, a senior market analyst at StoneX.
The odds of a half-percentage-point Fed rate hike next month surged on Tuesday after data showed US inflation accelerated more than expected in October and policymakers signalled a willingness to tighten policy more aggressively.
Traders now see a 100% probability of a rate increase in December, up from 84% prior to the data, according to the CME's FedWatch tool.
Although gold is typically seen as an inflation hedge, higher interest rates increase the opportunity cost of holding non-yielding bullion, reducing its appeal to investors.
"If we see positive developments in the Middle East that would be supportive for gold from an inflation standpoint. But overall, the near-term macro setup for gold does not seem positive," said Soni Kumari, an analyst at ANZ.
Meanwhile, Fed Vice Chair for Supervision Michelle Bowman joined a growing number of policymakers on Tuesday in stressing that bringing down inflation remains the central bank's top priority.
Philadelphia Fed President Anna Paulson said the central bank has more rate increases ahead as it moves to lower elevated levels of inflation.
Among other metals, spot silver climbed 2.9% to $53.01per ounce, and palladium gained 2.5% to $1,050.05. - Reuters
