Gold pressured by stronger dollar

Gold prices fell on Wednesday under pressure from a stronger dollar and uncertainty ahead of a key US inflation report that could provide more clarity about the Federal Reserve's September policy meeting.

Spot gold was down 0.6 percent at $2,510.39 an ounce by 0953 GMT but held above the psychologically key level of $2,500, having climbed to a record high of $2,531.60 on Aug. 20.

The US currency steadied on Wednesday, making dollar-priced commodities less attractive for buyers using other currencies. Recent declines in the dollar had pushed the currency to its weakest in more than a year.

The dollar index , which measures performance against a basket of currencies, was last up 0.36 percent.

"There are a lot of moving parts today, and items like Nvidia results are hanging over the market for direction clues on (interest) rates," one gold trader said. "The Fed is rightly cautious right now and that's not helping people with direction. Cash is king today."

Markets are focused on looming US personal consumption expenditure (PCE) data, the Fed's preferred measure of inflation, due on Friday. Markets are pricing in about a 66 percent chance of US interest rates being cut by 25 basis points (bps) in September and a 34 percent chance of a 50 bps cut, the CME FedWatch tool shows.

With a rate cut widely expected, physically backed gold exchange-traded funds (ETFs) started purchases again after several years of outflows.

With modest net inflows of 8 metric tons ($403 million) last week, according to the World Gold Council, gold ETFs are heading for a fourth consecutive month of inflows in August.