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Gold ticks lower after Fed officials call for more rate hikes

FILE PHOTO: Newly casted ingots of 99.99% pure gold are stored after weighing at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk

By Ashitha Shivaprasad

(Reuters) - Gold reversed course to trade lower on Wednesday as hawkish remarks from U.S. Federal Reserve officials dampened hopes of a let-up in aggressive policy tightening after tame inflation data.

Spot gold was down 0.3% to $1,788.39 per ounce by 3:34 p.m. ET (1934 GMT). It had risen to its highest since July 5 after the consumer price index (CPI) data.

U.S. gold futures settled up nearly 0.1% at $1,813.7.

Data showed U.S. consumer prices did not rise in July due to a drop in gasoline costs, the first notable sign of a pause in inflation that has climbed over the past two years.

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"Gold initially had a knee-jerk reaction after tamer inflation data as investors expected a less aggressive Fed. But, then they realised the data is tamer not tame," said Jim Wyckoff, senior analyst at Kitco Metals.

The metal, which tends to do well in a low-interest rate environment, came under pressure after Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans reaffirmed an aggressive path for interest rate hikes.

Kashkari said the U.S. central bank will need to raise its policy rate to 3.9% by year-end and to 4.4% by the end of 2023 to tame inflation.

Meanwhile, Goldman Sachs cut its price forecasts for the metal, saying that "structurally, gold is likely to remain range-bound as growth and tightening factors continue to offset each other."

Spot silver rose 0.2% to $20.53 per ounce, platinum was up 0.7% to $939.97 while palladium jumped 1.5% to $2,249.14.

(Reporting by Ashitha Shivaprasad and Seher Dareen in Bengaluru; Editing by Shinjini Ganguli and Aditya Soni)