BENGALURU: Gold prices edged higher on Wednesday after dropping more than 1% in the previous session, as investors digested hotter-than-expected US inflation data and still banked on a Federal Reserve interest rate cut in June.

Spot gold edged up 0.4% to $2,164.69 per ounce, as of 1212 GMT. Bullion posted its worst single-day drop since Feb 13 on Tuesday. US gold futures rose 0.2% to $2,170.00.

“The market driver behind the decline of gold is quite clear as the US CPI numbers came in higher than expected,” said Carlo Alberto De Casa, a market analyst at Kinesis Money. “It’s just a psychological correction after a long strike of positive days and markets are realizing that the Fed will not cut rates too quickly.” Bullion slumped 1.1% on Tuesday as data indicated that US consumer prices rose sharply in February, above expectations, indicating some stickiness in inflation.

Higher-than-expected inflation means that the Fed will be under more pressure to keep interest rates higher for longer, weighing on non-yielding assets such as gold.

However, Fed policymakers are still seen starting rate cuts in June. Traders now see about a 65% chance of a June cut, slightly lower than the 72% seen before the data, according to the CME Group’s FedWatch Tool.