(Bloomberg) -- Gold traded steady Wednesday after a two-day decline as traders await key US inflation data due later this week that may shed more light on the Federal Reserve’s path for interest rates.

Bullion was trading above $2,300 an ounce after dropping about 3% in the prior two sessions, when an easing of tensions in the Middle East sapped haven demand. 

More selling in gold may be limited as funds known as commodity trading advisors “are unlikely to liquidate their length north of $2,200,” TD Securities commodity strategist Daniel Ghali said in a note. 

Meanwhile, “macro trader positioning has remained constrained by the relentless rise” in the dollar and rising US yields as markets increasingly dialed back bets on the timing and magnitude of the Fed’s pivot to easing, he said.

Traders are eyeing Friday’s release of the personal consumption expenditures index — the Fed’s preferred measure of inflation. It is forecast to show that price pressures remained elevated in March. That would support the case for a delay in rate cuts, a headwind for gold as it doesn’t pay interest.

The odds of a reduction in US borrowing costs in June — the base-case scenario earlier in the year — have dropped sharply over the last few weeks, with the swaps market now pricing in just a 14% chance. Some traders in the rates market are now putting on wagers that the Fed won’t cut at all this year. 

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Gold is still up about 17% since mid-February, supported by heightened geopolitical risk, central-bank purchases and a sharp uptick in buying by Chinese retail investors.

Spot gold added 0.2% to $2,326.03 an ounce as of 11:42 a.m. in New York. The Bloomberg Dollar Spot Index rose 0.2%. Silver drifted lower, while platinum and palladium fell. 

--With assistance from Sybilla Gross and Jack Ryan.

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