Gold prices eased into a tight range on Wednesday as traders braced for key U.S inflation data due later in the day, which could impact the Federal Reserve’s policy stance.

Spot gold was down 0.1% at $2,031.43 per ounce, as of 0402 GMT. U.S. gold futures were down 0.2% at $2,038.20.

The U.S. consumer price index (CPI) data is due at 1230 GMT. Economists polled by Reuters expect a 5.5% year-on-year increase in core consumer prices for April.

Gold ticks up on economic risks, US inflation in focus

If the U.S. inflation remains moderately controlled, it may lead to a pause in Fed rate hikes, which will weaken the dollar and support gold, said Hareesh V, the research head at Geojit Financial Services.

Markets are currently pricing in an 83% chance of the U.S. central bank holding rates at their current level in June.

On Tuesday, Fed Governor Philip Jefferson said the U.S. economy is slowing in an “orderly fashion,” while New York Fed President John Williams said it is too soon to say whether the central bank is done raising interest rates.

Although gold is considered a hedge against inflation, rising interest rates dull non-yielding bullion’s appeal.

The weak outlook for the U.S. currency and yields reignite the safe-haven status of gold, Hareesh said.

“Worries over the global economy and demand-supply outlook may also support the commodity in the near future,” Hareesh added.

Investors are also closely watching the developments surrounding the U.S. debt ceiling.

President Joe Biden and top lawmakers agreed on Tuesday to further talks aimed at breaking a deadlock over raising the $31.4 trillion U.S. debt limit, with just three weeks before the country may be forced into an unprecedented default.

According to Reuters technical analyst Wang Tao, spot gold may retrace the $2,019-$2,024 per ounce range.

Spot silver fell 0.2% to $25.58 per ounce, platinum edged 0.1% higher to $1,106.11, while palladium slipped 0.2% to $1,566.85.