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Gold prices were steady on Wednesday as investors exercised caution ahead of a key U.S. inflation print that could shed some light on the Federal Reserve's rate cut trajectory.

Spot gold was little changed at $2,028.69 per ounce, as of 0405 GMT, trading in a range of about $6. U.S. gold futures rose 0.1% to $2,034.20 per ounce.

"A combination of stability in the U.S. dollar and bond yields, in contrast to what we witnessed at the tail-end of 2023, has effectively applied the brakes to the gold price," said Tim Waterer, chief market analyst at KCM Trade.

The dollar index ticked up against a basket of currencies, and is up 1.6% so far this month, while yields on 10-year U.S. Treasury notes remained above 4%. [USD/]

Traders will turn their focus to Thursday's U.S. consumer price inflation report that is expected to show headline inflation rose 0.2% in December and 3.2% on an annual basis.,

"Any signs of softness in the data could be a boon for the gold price," said Waterer.

An official U.S. report revealed that consumers expect a decline in inflation, while Fed Governor Michelle Bowman said the U.S. central bank's monetary policy seems "sufficiently restrictive".

Market participants are pricing in an about 68% chance of a U.S. rate cut in March, according to the CME FedWatch tool.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

Spot gold may retest support of $2,016 per ounce, a break below which could open the way towards $2,006, according to Reuters technical analyst Wang Tao. [TECH/C]

Spot silver fell 0.2% to $22.93 per ounce, while platinum rose 0.2% to $931.74, and palladium gained 0.7% to $985.48.