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Gold pares gains on reduced rate cut bets after Fed verdict

A vendor arranges gold chains displayed at VJ Gold and Diamond jewellery shop in Kuala Lumpur

By Anjana Anil and Rahul Paswan

(Reuters) - Gold prices pared gains on Wednesday after the U.S. Federal Reserve said it sees only one interest rate cut this year, citing still elevated levels of inflation.

Spot gold climbed 0.3% to $2,322.46 per ounce by 3:18 p.m. ET (1918 GMT), after rising as much as 1% earlier in the day, supported by a surprisingly soft U.S. consumer inflation report.

U.S. gold futures for August delivery settled 1.2% higher at $2,354.8.

The Federal Reserve held interest rates steady on Wednesday, while policymakers indicated they expect to cut rates only once in 2024.

"The Fed neither lowered nor it raised its interest rates, so you had investors moving into less risky assets, including gold, so prices got very high and profit taking set in." said Jeffrey Christian, managing partner of CPM Group.

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Fed chair Jerome Powell said the inflation outlook offered by the Fed is "a fairly conservative forecast" that may not be borne out by coming data, and is subject to revision.

Powell added that better-than-expected inflation consumer price index data was something officials welcome.

"Powell acknowledging that the FOMC had a chance to change projections after seeing today's data and his emphasis that it's ONE good report sends a clear message: 'Don't send out the Pivot Party invitations just yet," said Tai Wong, a New York-based independent metals trader.

"Gold will continue to trade with employment and inflation data."

The headline consumer price index was flat on a month-on-month basis in May, below expectations for a 0.1% gain. Core prices rose 0.2%, also below economists' projections for a 0.3% increase.

The dollar index was down 0.6%, paring some of its earlier losses after the Fed's rate cut verdict. [USD/]

Bets of a rate cut at the Fed's meeting in September fell to about 64% from around 71% prior to the release of Fed's decision..

Spot silver rose 1.5% to $29.69 per ounce, platinum was up 1.2% at $962.85 and palladium gained 2.6% to $907.01.

(Reporting by Anjana Anil and Rahul Paswan in Bengaluru; Editing by Paul Simao, Nick Zieminski, Shreya Biswas and Vijay Kishore)