Jan 14 (Reuters) - Gold prices held nearly steady on Tuesday as market participants maintained caution ahead of key U.S. inflation data, which could throw further light on the U.S. interest rate trajectory.
Spot gold was little changed at $2,663.29 per ounce as of 9:40 a.m. ET (1440 GMT) after briefly rising 0.5% soon after the Producer Price Index (PPI) data.
Data showed PPI rose 3.3% on an annual basis in December, versus the 3.4% rise expected by economists polled by Reuters.
U.S. gold futures fell 0.1% to $2,676.40.
"We're going to need to see continued progress on inflation in order to bring back those interest rate cut expectations," said Phillip Streible, chief market strategist at Blue Line Futures.
"People are a little bit nervous, and they want to be cautious going into CPI tomorrow," he added.
Investors now await the Consumer Price Index (CPI) on Wednesday to analyse the Fed's policy path. A Reuters poll forecast an annual rise of 2.9%, versus November's 2.7%, and a monthly increase of 0.3%.
Traders currently see the Fed delivering 29.4 basis points worth of rate cuts by the end of the year, data compiled by LSEG shows.
Bullion is considered a hedge against inflation, but higher rates dull the appeal of the non-yielding asset.
U.S. President-elect Donald Trump will return to the White House on Jan. 20 and has vowed to impose trade tariffs. Analysts expect these to trigger trade wars and re-ignite inflation.
UBS noted that a stronger dollar and elevated U.S. yields will likely remain headwinds in the first half of this year for gold but should be more than offset by demand for the metal as a diversifier.
Spot silver rose 0.4% to $29.71 per ounce, platinum fell 0.9% to $944.7, and palladium shed 0.6% to $933.00.
Reporting by Anjana Anil in Bengaluru; Editing by Alexander Smith