Spot gold was up 0.3% at $4,136.22 per ounce by 1:55 pm EDT after hitting its lowest since Oct.15 in earlier trade.
US gold futures for December delivery rose 0.2% to $4,152.60 per ounce.
“I think the market is currently expecting one 25-basis-point rate hike this year, but probably not until December. The likelihood of an October rate hike has dropped pretty significantly,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
“I think gold prices will be range-bound for the time being. But I think the bias remains to the downside.”
Attention is turning to the Federal Reserve’s Oct. 27-28 policy meeting and next week’s US Personal Consumption Expenditures (PCE) report for clues on future rate moves.
Markets are pricing in an 88% chance that the Federal Reserve will raise interest rates in December, according to CME’s FedWatch Tool.
Nearly all economists surveyed by Reuters expect the Federal Reserve to hold interest rates steady this month before delivering a hike in December, as policymakers opt for patience despite persistent inflation pressures that would otherwise call for stronger action.
Although gold is traditionally considered an inflation hedge, higher rates dent its appeal as investors prefer yield-bearing assets.
Brent crude held around $108 a barrel on Wednesday as Iran’s comments dimmed hopes for a diplomatic breakthrough with the United States.
“I would still believe in the short term, gold is in consolidation mode. So whenever we go below 4,100, it’s bottoming out because there is buying interest, but the upside remains limited as long as the conflict in the Middle East is somehow still a topic,” said Giovanni Staunovo, an analyst at UBS.
Among other metals, spot silver slid 0.6% to $57.62 per ounce, platinum fell 1.2% to $1,629.14 and palladium dropped 1.1% to $1,090.15.