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Gold rebounded from a near one-year low on Wednesday as the dollar retreated following an initial rally, helping bullion stave off pressure from prospects of steep rate hikes after U.S. consumer prices surged.

Spot gold rose 0.8% to $1,739.49 per ounce by 1:59 p.m. ET (1759 GMT), clambering from its lowest since August 2021 at $1,707.09 after the U.S. data powered the dollar to a fresh multi-decade peak.

U.S. gold futures settled up 0.6% at $1,735.5.

U.S. consumer prices accelerated in June, cementing the case for the Federal Reserve to hike rates by 75 basis points later this month.

The dollar subsequently gave up gains, boosting appetite for gold among overseas buyers. U.S. Treasury yields also slipped. [USD/] [US/]

The CPI print drove the idea that the Fed is more likely than not to hike rates aggressively and probably keep them there for longer, driving gold's initial retreat, said Bart Melek, head of commodity strategies at TD Securities.

The retreat in yields and the dollar that followed could be helping gold, with investors who took short positions as gold moved to the low $1,700s now covering those, Melek added.

Although gold is considered an inflation hedge, rising rates draw investors away from bullion by raising the opportunity cost of holding the zero-yield asset.

Steep rate hike prospects were still likely to keep a tight leash on gold, analysts said, even as economic concerns persisted.

But Fawad Razaqzada, market analyst at City Index, said in a note that "the post-CPI reaction clearly suggests that investors are thinking that the big inflation readings will hurt the economy so badly that not only will the Fed stop hiking rates soon, but will go in reverse as early as Q1."

Spot silver rose 1.8% to $19.23 per ounce, platinum was up 1.1% at $855.31, while palladium fell 2.2% to $1,982.84.