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Gold prices flitted in a tight range on Thursday as market participants maintained a cautious stance ahead of a key U.S. inflation reading that could influence the size of the Federal Reserve's next interest rate hike.

Spot gold held its ground at $1,670.20 per ounce, as of 0239 GMT. U.S. gold futures dipped 0.1% to $1,676.50.

Although traditionally considered an inflation hedge, rising interest rates to combat high prices have reduced bullion's appeal since the metal yields no interest.

"Inflation is going to remain very sticky for a while and will keep gold under pressure ... In the near-term, trading range for gold prices will be $1,620 to $1,740" said Edward Meir, an analyst with ED&F Man Capital Markets.

The U.S. Consumer Price Index data is due at 1230 GMT and is forecast to come in at a hot 8.1% year-on-year in September, which could cement expectations of another big rate hike from the Fed.

A stronger print would be negative for gold, ANZ wrote in a note.

Wednesday's readout of the central bank's last policy meeting showed Fed policymakers agreed they needed to move to a more restrictive policy stance, and then maintain that for some time to lower inflation.

Gold still looks weak on the charts and any rally in prices will be short-term as the Fed is still concerned about inflation and remains very hawkish, Meir added.

On the physical front, the London Bullion Market Association said on Wednesday it wants to recognise firms that gather and refine gold dug up by small-scale miners in developing countries.

Market participants also took stock of new COVID-19 infections reported from top gold consumer China, which imposed restrictions to curb its spread in some regions. [GOL/AS]

Spot silver fell 0.6% to $18.95 per ounce, platinum rose 0.1% to $880.68 and palladium lost 0.1% to $2,134.03.