Gold treads water as traders await direction from US inflation data

Gold prices were little changed on Thursday, as investors withheld large bets ahead of US inflation data later in the day that is expected to offer further clarity on the Federal Reserve's rate hike trajectory.

Spot gold was steady at $1,674.30 per ounce, as of 0900 GMT. US gold futures rose 0.2% to $1,680.

The US Consumer Price Index (CPI) data due at 1230 GMT is forecast to come in at a hot 8.1% year-on-year in September.

"If CPI numbers are higher-than-expected, then the Fed will be very unlikely to deviate from its current stance of continuing with the rate hikes and reducing the balance sheet," said Ricardo Evangelista, senior analyst at ActivTrades.

"This will continue to offer support to the dollar and be detrimental for gold...Right now, the upside potential in gold is being capped by the strong dollar and is dictating the unfolding of the events in what concerns gold prices." [USD/]

Traditionally considered an inflation hedge, interest rate hikes to combat soaring prices have reduced bullion's appeal since it yields no interest.

Fed policymakers agreed they needed to move to a more restrictive policy stance, and then maintain that for some time to lower inflation, the minutes of their Sept. 20-21 meeting showed on Wednesday.

Gold prices have fallen nearly $400 since rising above the key $2,000 mark in March, as the safe-haven failed to shine despite geopolitical uncertainty and a recent rout in equities, as most investors sought refuge in the dollar instead. [.EU]

Spot silver gained 0.2% to $19.09 per ounce.

"We expect silver prices to fall to $17-$18/oz over the next six months before rising to $22, as the Fed returns to rate cuts and quantitative easing and as China eventually strengthens," Citi said in a note.

Platinum was up 0.6% at $884.38 per ounce and palladium was flat $2,136.63.

(Reporting by Brijesh Patel in Bengaluru; Editing by Neha Arora)