Gold dips on firm dollar, markets look for Fed cues

Gold prices eased in a narrow range on Wednesday as the dollar held firm and traders refrained from taking big bets as they looked for clear signals on the U.S. Federal Reserve's rate path.

Spot gold GOLD ticked lower 0.2% to $1,959.19 per ounce by 06:37 GMT but held a $8 range. U.S. gold futures GOLD fell 0.3% to $1,975.00.

"Gold traders are waiting for clear signals on the economy that will warrant either a pause or a continuation of the tightening cycle," Craig Erlam, senior markets analyst at OANDA said.

Pockets of weakness, combined with resilient labour market figures and stubborn inflation, "don't help gold one way or another," he added.

Non-interest-bearing bullion tends to become less attractive in a high interest rate environment.

Supply gain pressures continued to abate in May, the New York Fed said in a report on Tuesday, further reducing what had been one of the key forces driving up inflation pressures around the world.

The U.S. consumer price report for May, due on June 13, ahead of the Fed meeting, will provide investors more clarity about the health of the world's largest economy.

"If the Fed ends up looking more hawkish because inflation is more durable, now that headwinds like the debt ceiling are out of the way... the risk is significant," said Ilya Spivak, head of global macro at Tastylive.

Fed fund futures indicate traders have priced in an 81.7% chance that the U.S central bank will hold interest rates in the 5%-5.25% range, according to CMEGroup's Fedwatch tool. However, they see nearly 53% odds of another hike in July.

Meanwhile, exports from top bullion consumer China shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.

Spot silver XAGUSD1! fell 0.5% to $23.4639 per ounce, platinum PL1! steadied at $1,031.40. Palladium XPDUSD1! flat at $1,412.22.