Gold charges higher as bets for Fed pause gain ground

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Gold accelerated over 1% on Wednesday as signs of cooling inflation added fodder to bets for a pause in U.S. interest rate hikes and dragged down the dollar and yields ahead of U.S. Federal Reserve's latest meeting minutes.

Spot gold jumped 0.9% to $2,021.39 per ounce by 9:04 a.m. EDT (1304 GMT), rising by as much as 1.3% earlier, while U.S. gold futures rose 0.9% to $2,036.90 per ounce.

The Consumer Price Index (CPI) climbed 0.1% in March after advancing 0.4% in February, compared with a forecast of 0.2% in a Reuters poll.

"The supercore inflation (services ex-housing) remains stubbornly high, including transportation, so I think the Fed could easily hike one more time before pausing, but they are close to the end," said Tai Wong, an independent metals trader based in New York.

Gold drew strength from the dollar and benchmark U.S. yields as they hovered near session lows.

While the miss on Wednesday's CPI report gave the yellow metal a lift higher, strong labour market trends and sticky core services inflation suggested a 25 basis points (bps) hike at the May meeting of the Fed's Federal Open Market Committee (FOMC) is still in the cards, TD Securities wrote in a note.

Markets were now pricing in a 69% chance of a 25 bps rate hike in the May meeting, according to CME's FedWatch tool.

While gold is seen as a hedge against inflation, higher rates to bring down prices tend to weigh on non-yielding gold's appeal.

Markets are also on the watch for the minutes of the Fed's March meeting at 1800 GMT (2 p.m. ET).

"The Fed minutes will be closely scrutinised for key insight into how policymakers evaluated the need for higher rates despite the turmoil in the banking sector," said Lukman Otunuga, senior research analyst at FXTM.

The IMF on Tuesday said lingering financial system vulnerabilities could erupt into a new crisis, but urged member countries to keep tightening monetary policy to fight inflation.

Spot silver shot up 2% to $25.57 per ounce, platinum gained 2.2% to $1,016.77 and palladium rose 0.3% to $1,450.11.