• Bullion posted its worst day since Feb. 13 on Tuesday
• U.S. producer price index due on Thursday

March 13 (Reuters) - Gold prices edged higher on Wednesday after dropping more than 1% in the previous session, as investors digested hotter-than-expected U.S. inflation data and still banked on a Federal Reserve interest rate cut in June.

Spot gold edged up 0.4% to $2,164.69 per ounce, as of 1212 GMT. Bullion posted its worst single-day drop since Feb. 13 on Tuesday. U.S. gold futures rose 0.2% to $2,170.00.

"The market driver behind the decline of gold is quite clear as the U.S. CPI numbers came in higher than expected," said Carlo Alberto De Casa, a market analyst at Kinesis Money.

"It's just a psychological correction after a long strike of positive days and markets are realizing that the Fed will not cut rates too quickly."

Bullion slumped 1.1% on Tuesday as data indicated that U.S. consumer prices rose sharply in February, above expectations, indicating some stickiness in inflation.

Higher-than-expected inflation means that the Fed will be under more pressure to keep interest rates higher for longer, weighing on non-yielding assets such as gold.

However, Fed policymakers are still seen starting rate cuts in June. Traders now see about a 65% chance of a June cut, slightly lower than the 72% seen before the data, according to the CME Group's FedWatch Tool.

"While physical gold demand has been holding up well since 2021, a sharp price rally is likely to temper discretionary gold buying in 2024," analysts at ANZ Research said in a note.

Focus now shifts to U.S. retail sales, the producer price index, and the weekly initial jobless claims print, due on Thursday, which will provide further updates on the status of the U.S. economy.

Spot platinum rose 1.2% to $935.25 per ounce, palladium gained 2.8% to $1,070.25 and silver was up 0.7% to $24.33.

Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here.

https://www.reuters.com/markets/commodities/gold-subdued-sticky-us-inflation-prompts-rate-cut-rethink-2024-03-13/