Gold held in a tight range on Wednesday as investors looked forward to U.S. inflation data that could shape the course of the Federal Reserve's monetary policy.

Spot gold was down 0.1pc at $1,891.05 per ounce by 1:44 p.m EDT (1744 GMT), while U.S. gold futures settled 0.1pc up at $1,895.50.

The underlying fundamentals remain favourable for precious metals as the Fed seems to be "stubbornly" holding on to the idea that current inflationary trends are transitory and thus is likely to keep monetary policy loose for the time being, said David Meger, director of metals trading at High Ridge Futures.

While there could be a knee-jerk market reaction if inflation runs "hotter than expected," the Fed would likely stick to its view that any jump is temporary, Meger added.

Traders will scan Thursday's U.S. consumer price index report for any signs the Fed could begin to step back from its ultra-loose monetary policy. Market participants are also awaiting a European Central Bank meeting on the same day.

"The one major element that favours the Fed's notion that inflation is going to be transitory, is that from a historical basis, treasury yields are nowhere suggesting inflationary pressures," said Kitco Metals senior analyst Jim Wyckoff.

Wyckoff added, however, that surging raw-material prices were indicative of an inflationary trend, also supportive of gold.

Gold is considered a hedge against inflation likely spurred by large stimulus from central banks and governments around the world.

But gold prices are increasingly vulnerable to a near-term pullback as speculative flows are now slowing alongside physical flows amid India's battle against COVID-19 and waning Chinese demand, TD Securities wrote in a note.

Among other precious metals, silver rose 0.8pc to $27.86 per ounce, palladium eased 1.2pc to $2,773.94, while platinum slipped 1.2pc to $1,148.07.