(Reuters) - Gold prices erased losses to gain on Thursday, after dipping to the lowest level in a month earlier in the day on the Federal Reserve's hint of a possible rate cut slowdown next year.
Spot gold gained 0.6% to $2,603.60 per ounce as of 0608 GMT, having hit its lowest since Nov. 18 in early trade. However, U.S. gold futures were trading 1.4% lower at $2,616.40.
Bullion declined more than 2% on Wednesday after the Fed lowered rates by 25 basis points as expected, but indicated that there will be fewer cuts by the end of 2025, boosting the dollar and bond yields. [USD/] [US/]
Fed Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering stubbornly high inflation.
"The big question over here is that because Fed says they will still be data-dependent and if Trump's policy starts to actually see inflation, a big risk would be that the Fed may not cut rates next year at all," said Kelvin Wong, OANDA's senior market analyst for Asia Pacific.
Markets now expect interest rates to remain unchanged at the Fed's January meeting.
"A rate cut is usually supportive for the yellow metal... but right now gold is up on short-covering after the dip," said Ajay Kedia, director at Kedia Commodities, Mumbai.
Traders are now awaiting key U.S. GDP, initial jobless claims data later in the day and core PCE data - the Fed's preferred inflation measure - on Friday.
"If the U.S. Personal Consumption Expenditures (PCE) data comes in line with expectations that shouldn't be a big surprise. But in case it inches up to 3% and above, we could see some pressure on gold again," Wong said, adding that very short-term oriented speculators are looking for opportunities to buy the dips.
Higher rates dull the appeal of the non-yielding asset.
Spot silver gained 0.2% to $29.40 per ounce, platinum added 0.5% to $923.94 and palladium advanced 1.6% to $917.25.
(Reporting by Brijesh Patel and Rahul Paswan in Bengaluru; additional reporting by Swati Verma; Editing by Alan Barona and Sumana Nandy)