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Gold prices edged up on Wednesday, helped by a softer dollar as investors looked to the Federal Reserve's much-awaited policy decision after the U.S. inflation print cemented bets for a pause in interest rate hikes.

Spot gold rose 0.2% to $1,947.25 per ounce by 0257 GMT. U.S. gold futures edged higher 0.1% to $1,960.50.

The U.S. dollar eased slightly, making greenback-priced bullion more appealing to overseas buyers.

U.S. consumer price index rose 4.0% in May, its 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.

"The Fed, while it may pause at this meeting, will certainly maintain a tightening bias for the foreseeable future (given the core inflation number)," Clifford Bennett, chief economist at ACY securities said.

Fed officials sat down on Tuesday for their first meeting in 15 months with no pre-determined interest rate hike on the table, in what amounts to the debut gathering of the "will-they-or-won't-they" era.

Expectations the Fed will keep its target rate unchanged in a range of 5% to 5.25% are currently at 95.4%, according to CME's Fedwatch tool.

"Growing realisation that the Fed is unlikely to cut rates for the rest of this year, has seen a lot of investors exit the gold market of late. The price action in the recent range has been cause for caution but it does look as though the buy side is going to win out in this epic struggle," Bennett added.

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

Spot silver advanced 0.6% to $23.8139 per ounce, platinum rose 0.3% to $979.05, and palladium advanced 0.2% to $1,363.36.