Gold gained on Tuesday as the dollar slipped after tame US inflation data supported the Federal Reserve's 'patient' stance on interest rate hikes, while investors awaited a key Brexit vote later in the day. Spot gold rose 0.4 percent to $1,298.63 per ounce as of 2:09 p.m. EDT (1809 GMT), while US gold futures settled 0.5 percent higher at $1,297.70.
US consumer prices rose for the first time in four months in February. However, the annual gain was the smallest in about 2-1/2 years, showing inflation remained low. "Weaker inflation data keeps the Fed's potential to raise rates on the back burner. We don't see a need for the Fed to be so hawkish at the moment, and that could have played a small hand in gold's rally," said Phil Streible, senior commodities strategist at RJO Futures in Chicago.
"The dollar index's weakness and uncertainty around Brexit are also driving prices." The dollar fell compared with major currencies following the data, bolstering appeal for bullion. Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar.
The data "continues a theme of low and non-problematic inflation in major world economies, which is allowing central banks to keep interest rates low," Jim Wyckoff, senior analyst at Kitco Metals said in a note. "Gold and silver markets upticked following the report, which favors monetary policy doves."
Investors would now be keeping a close eye on a vote on the Brexit deal around 3 p.m. EDT, with Prime Minister Theresa May's newly won assurances on her divorce deal failing to win over the main Brexit faction in her Conservative Party. Reflecting investor sentiment, holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.4 percent to 769.53 tonnes on Monday.
Gold is facing stiff resistance at the $1,300 mark, having failed to significantly break above the key psychological ceiling, despite recent momentum on the back of the dollar's declines fuelled by weak US jobs data and modest retail sales in January. Among other precious metals, palladium was up 0.3 percent at $1,540.01 per ounce, while platinum gained 1.2 percent to $834.55. Silver advanced 0.6 percent to $15.41 per ounce, after touching its highest since March 1 earlier in the session.