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Gold prices were flat on Wednesday, as traders positioned themselves for key U.S inflation data due later in the day, which could impact the Federal Reserve's policy stance.

Spot gold was unchanged at $2,032.86 per ounce, as of 0201 GMT. U.S. gold futures were down 0.1% at $2,041.50.

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.

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

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 U.S. 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 outlook of a weak U.S. currency and yields reignite the safe haven status of gold. 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.

Spot silver fell 0.1% at $25.58 per ounce, platinum edged 0.1% higher to $1,105.82, and palladium gained 0.1% at $1,571.23