Sept 30 (Reuters) - Gold prices edged higher on Wednesday but remained on track for a monthly decline as prospects of higher interest rates dented sentiment, while investors awaited US inflation data for clues on the Federal Reserve's policy path.
Spot gold rose 0.2% to $4,188.17 per ounce, as of 0920 GMT, but has lost more than 5% so far this month.
The US dollar eased but was headed for a monthly gain, making greenback-denominated metals more expensive for holders of other currencies.
"Gold is very much at the whims of Fed rate hike expectations and comments from policymakers," said Jamie Dutta, market analyst at trading platform Nemo.money. "Last week's strong data and hawkish Fedspeak saw a delayed sharp sell-off on Monday. But a more dovish slant from the influential (Federal Reserve Bank of New York President John) Williams on Tuesday has seen bullion prices rebound."
Gold fell nearly 4% to as low as $4,110.55 per ounce on Monday, as a surge in crude oil prices led to increased expectations for the Fed to further raise interest rates.
Williams, a permanent voter at the Fed's rate-setting panel, said on Tuesday that Fed policymakers probably only need to deliver one more hike this year to get inflation back on track to the central bank's 2% goal. He also said that there is time to parse data before raising rates again.
Ahead of Williams' comments, traders saw a strong chance the Fed would hike rates at its October 27-28 monetary policy meeting, a notion Williams appeared to push back on. After his remarks, traders pared those bets to about even.
According to the CME FedWatch Tool, traders see a 45% chance of a Fed rate increase in October and an 89% chance of a hike in December.
Higher interest rates typically reduce gold's appeal because the metal does not offer a yield.
Investors are now looking out for the US personal consumption expenditures price index, an inflation indicator closely watched by Fed officials, due at 1230 GMT.
On the geopolitical front, Qatar said it hoped shuttle diplomacy between Tehran and Washington would yield a breakthrough, even after US President Donald Trump denied reports that he would ease sanctions and release frozen Iranian funds in return for nuclear concessions.
Spot silver fell 0.8% to $60.98, platinum rose 0.5% to $1,714.71 and palladium slid 0.2% to $1,220.98. All three metals were poised for monthly declines.
Reporting by Pablo Sinha in Bengaluru; Editing by Xevi Fontdegloria
