Gold prices lifted modestly during Asian trade on Wednesday, as investors positioned ahead of key United States inflation data that could influence the outlook for Federal Reserve interest rates.
By 3:40 pm AEDT (4:40 am GMT), spot gold was up 0.3% at US$5,208.03 per ounce.
Despite escalating tensions from the ongoing conflict in the Middle East, gold has struggled to fully capitalise on its traditional role as a safe-haven asset and inflation hedge in recent sessions.
Part of the support for gold on Wednesday came from falling oil prices, which improved risk sentiment across financial markets and contributed to a softer U.S. dollar.
A Wall Street Journal report indicating that the International Energy Agency (IEA) has proposed the largest release of emergency oil reserves in its history weighed on crude prices and helped boost broader market confidence.
The improvement in risk sentiment reduced demand for the U.S. dollar as a haven asset, indirectly supporting gold prices.
Investors are now focusing on the upcoming U.S. consumer price index (CPI) report, which is expected to provide important clues about the trajectory of inflation and the potential timing of interest rate cuts by the Federal Reserve later this year.
Markets are expecting headline CPI inflation to remain at 2.4% annually, and for core CPI inflation to hold steady at 2.5% in February.
On a monthly basis, core CPI is expected to rise 0.3% following a 0.2% increase in January.
