FILE PHOTO: Ingots of 99.99 percent pure gold are placed on a cart at the Krastsvetmet non-ferrous metals plant, one of the world's largest producers in the precious metals industry, in the Siberian city of Krasnoyarsk, Russia November 22, 2018. REUTERS/Ilya Naymushin/File Photo
FILE PHOTO: Ingots of 99.99 percent pure gold are placed on a cart at the Krastsvetmet non-ferrous metals plant, one of the world's largest producers in the precious metals industry, in the Siberian city of Krasnoyarsk, Russia November 22, 2018. REUTERS/Ilya Naymushin/File Photo

Bengaluru — Gold prices edged higher on Thursday as soft US inflation data raised expectations that the US Federal Reserve would pause rate hikes in 2019, while investors were looking for developments in trade talks between Washington and Beijing.

Spot gold was up 0.2% at $1,308.39 per ounce, as of 2.56am GMT. US gold futures were down 0.3% at $1,311.

US consumer prices were unchanged for a third straight month in January, leading to the smallest annual increase in inflation in more than one-and-a-half years, which could allow the US Federal Reserve to hold interest rates steady for a while.

"If you look more broadly, the Fed is unlikely to raise rates in an environment where inflation is still low," said Ilya Spivak, a senior currency strategist at DailyFX.

There is a dense layer of technical support for gold around $1,294-$1,307, he added.

Gold prices touched a more than one-week high of $1,318.12 on Wednesday, but pared gains in the late session on the dollar's strength.

The dollar benefited from sustained strength in core US inflation. In the latest 12-month period, the so-called core CPI rose 2.2% for a third straight month.

"The data was supportive for the dollar. You can see intraday declines [in gold on the data], but there is not enough juice for a downside breakout in gold," Spivak said.

Gold prices have risen nearly 13% since touching more than one-and-a-half-year lows in mid-August, mostly on expectations of a pause in interest rate hikes and tumultuous stock markets.

The US central bank held rates steady in late January and promised to be "patient" in rate moves due to impending slowdown and uncertain trade backdrop.

Several Fed officials have indicated that they will support a pause in interest rate hikes to assess its effect on the economy.

Lower interest rates reduce the opportunity cost of holding noninterest-bearing gold and weigh on the dollar.

Meanwhile, investors were hoping for a breakthrough in the trade impasse between the US and China.

US President Donald Trump said on Wednesday the talks with China were "going along very well" as they try to resolve the tariff dispute ahead of a March 1 deadline.

Although gold is experiencing several headwinds from a robust dollar and improved risk appetite, prices remain supported by global growth worries, analysts with Singapore-based Phillip Futures said in a note.

With gold unable to break higher, outflows rose in holdings of SPDR Gold Trust, the world's largest gold-backed ETF. Holdings have fallen more than3% so far in February.

Elsewhere, palladium rose 0.4% to $1,400 per ounce.

Platinum was up 0.1% at $784 per ounce, while silver rose 0.4% to $15.63. 

Reuters