NEW YORK: Gold prices eased from an eight-month peak on Wednesday as investors positioned themselves ahead of US inflation data that could hint at the Federal Reserve’s policy path with expectations mounting that slower rate hikes were on the horizon.

Spot gold edged 0.1 percent lower to $1,874.89 per ounce by 12:19 p.m. ET (1719 GMT). US gold futures gained 0.1 percent to $1,877.80.

Prices were trending lower on some “profit taking from the shorter term futures traders ahead of the CPI report tomorrow,” said Jim Wyckoff, senior analyst at Kitco Metals, adding that the market could continue to trade sideways ahead of the data.

The US consumer price report will be closely watched for cues on Fed’s strategy after the pace of rate hikes was slowed to 50 basis points in December after four consecutive 75 bps hikes.

Traders see a 77 percent chance the Fed will raise the benchmark rate by 25 bps to 4.50 percent-4.75 percent in February, and see rates peaking at 4.92 percent by June.

However, HSBC on Wednesday estimated a final 50 bps hike at the Jan. 31-Feb. 1 monetary policy meeting.

“This could be a big report if we get another good reading that shows inflation falling faster than anticipated,” said Craig Erlam, a senior market analyst at OANDA, adding it could be enough to change the hawkish tone the markets are continuing to hear from the Fed.

While worries remain about over the scale and impact of the COVID outbreak in top gold-consumer China, “over the longer term, China is expected to bounce back strongly which could stimulate additional demand,” Erlam said.

Spot silver fell 0.9 percent to $23.41 per ounce, on track to fall for three sessions in a row.