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 Gold prices slipped on Wednesday, although were trading above a more than two-week low hit in the previous session as investors await U.S. inflation data that could shape expectations around the Federal Reserve's interest rate outlook.

Spot gold dropped 0.2% to $1,908.70 per ounce by 0308 GMT, having touched their lowest level since Aug. 25 at $1,906.50 on Tuesday. U.S. gold futures slid 0.2% to $1,931.10.

"Any upside surprises in the U.S. inflation data could have gold again being pressured below the $1,900 level," KCM Trade Chief Market analyst Tim Waterer said in a note.

With energy prices on the rise, expectations are for the headline inflation figures to come in stronger. [O/R]

"On the flip side, if the energy price impact is not as great as feared in the data, we could see a pullback in yields and a path opened higher for gold," Waterer added.

The U.S. Consumer Price Index (CPI) data due at 1230 GMT could offer some insights on what to expect from the Fed in terms of rate hikes.

While the Fed is expected leave interest rates unchanged at its Sept. 19-20 policy meeting, the U.S. central bank will probably wait until the April-June period of 2024 or later before cutting it, according to economists in a Reuters poll.

The European Central Bank also expects inflation to remain above 3% next year, bolstering the case for a tenth consecutive interest rate hike on Thursday.

Bullion is highly sensitive to rising interest rates as they increase the opportunity cost of holding non-yielding bullion.

Spot gold may retest a support at $1,905 per ounce, with a good chance of breaking below this level and falling towards $1,898, according to Reuters technical analyst Wang Tao. [TECH/C]

Elsewhere, spot silver shed 1% to $22.88 per ounce, platinum fell 0.8% to $903.09 and palladium dropped 0.9% to $1,229.71.