Investing.com - Gold prices bounced off five-month lows on Wednesday, as the U.S. dollar weakened after tepid U.S. inflation data and ahead of the Federal Reserve's policy decision due later in the day.
Comex gold futures were up $6.10 or about 0.49% at $1,247.80 a troy ounce by 08:50 a.m. ET (12:50 GMT), off five-month lows of $1,238.30 hit on Tuesday.
Data earlier showed that U.S. consumer price inflation rose as expected in November, while the core data unexpectedly eased.
Sentiment on the greenback was also vulnerable after a Democrat candidate won a a U.S. Senate seat in Alabama, reducing the Republican camp's already narrow Senate majority.
The reduced Senate majority could make it more difficult for President Donald Trump to implement tax reform plans and other economic policies.
The Fed is widely expected to raise interest rates at its two-day policy meeting that will end on Wednesday and is currently seen tightening two to three times next year, but concerns over tepid inflation could alter the outlook for 2018.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.23% at 93.84.
Gold is sensitive to moves in both U.S. rates and the dollar. A weaker dollar makes gold less expensive for holders of foreign currency, while a rise in U.S. rates lifts the opportunity cost of holding non-yielding assets such as bullion.
Elsewhere on the Comex, silver futures were up 0.68% at $15.77 a troy ounce.