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 Gold slipped on Tuesday as Treasury yields rebounded, while traders firmed up bets the Federal Reserve would stand pat on interest rates after data showed U.S. consumer price gains slowed in May.

Spot gold fell 0.7% to $1,942.59 per ounce by 01:53 p.m. EDT (1753 GMT), after rising as much as 0.7% on U.S. inflation data.

U.S. gold futures settled 0.6% lower at $1,958.6.

Benchmark U.S. 10-year Treasury yields rose to 3.807%, making non-yielding bullion less attractive. [.N] [US/]

"Gold couldn't hold on to post-CPI gains over growing concern that stubborn underlying inflation may produce a hawkish Fed dot-plot tomorrow pointing to fewer-than-expected rate cuts in 2024," said Tai Wong, a New York-based independent metals trader.

The U.S. consumer price index (CPI) rose 4.0% in May, the smallest annual increase in more than two years, but stayed well above the Fed's 2% target.

In the 12 months through May, core CPI climbed 5.3%, showing that underlying price pressures remained strong.

Traders now see a more than 90% chance the U.S. central bank will decide to forgo an 11th straight interest-rate hike and keep the benchmark rate at 5.00% to 5.25% on Wednesday. Before the report, traders saw about a one-in-four chance of a June rate hike.

While gold is seen as a hedge against inflation, higher rates to tame price pressures generally weigh on the non-yielding asset's appeal.

The dollar eased 0.4% to near its lowest in three weeks, putting a floor under greenback-priced bullion. [USD/]

"The market participants are acknowledging the idea that we might be near terminal rates regardless," said Daniel Ghali, commodity strategist at TD Securities, adding "the market is set up here for an asymmetric reaction to the upside on a pause."

Silver fell 1.6% to $23.67 per ounce, platinum dropped 1.3% to $976.94 while palladium gained 0.8% to $1,360.28.