Gold rises as dollar slips

Gold inched up on Wednesday as the dollar pulled back. But it increases were capped by bets for more aggressive Federal Reserve rate hikes fuelled by a surprise rise in U.S. inflation.

Spot gold edged up 0.2 percent to $1,704.13 per ounce by 0936 GMT. U.S. gold futures declined 0.1 percent to $1,715.10.

Although weakness in dollar is helping pull gold off its lows, higher yields are likely to make it more difficult for prices to make any meaningful gains in the short term, according to chief markets analyst at CMC Markets Michael Hewson.

The dollar index dipped 0.4 percent on Wednesday, making gold less expensive for overseas buyers. Moreover, world stocks were stuck in a sea of red as markets braced for a more aggressive Fed, and the yen climbed as Japan gave its strongest signal yet that it could act to shore up the battered currency.