Gold edged up on Wednesday, helped by a retreat in the dollar, but bets of steep rate hikes from the U.S. Federal Reserve kept a leash on further gains for the non-yielding asset.

Spot gold rose 0.1% to $1,702.90 per ounce by 10:02 a.m. ET (1402 GMT). Gold marked its biggest one-day percentage decline since July 14 on Tuesday, driven by the dollar's rally following a surprise rise in U.S. inflation. U.S. gold futures fell 0.2% to $1,713.40. The U.S. consumer price index unexpectedly gained 0.1% in August, cementing bets for aggressive rate hikes.

"Gold could potentially stabilize and right now, the markets are still kind of digesting that inflation report, but it seems that $1,700 level is holding- that's key for gold," said Edward Moya, senior analyst with OANDA.

The dollar fell 0.3%, making greenback-priced bullion less expensive for overseas buyers. Markets are now pricing in a rate hike of at least 75 basis points by the Fed at its Sept. 20-21 policy meeting.

Gold is considered a hedge against inflation, but higher rates to tame rising price pressures dim appetite for the asset since it bears no interest.

"After the FOMC meeting, (the Fed) might also lead markets to believe they could still remain that aggressive... that's lights out for gold. (If) $1,700 breaks, then we're looking at not much technical support... that's the day where you might see gold fall $50 or even more," Moya added.

Spot silver rose 1.4% to $19.58 per ounce, platinum gained 3.2% to $906.36, and palladium added 1.1% to $2,126.51.

"We expect continued outflows from money managers and ETF holdings to weigh on prices, which will ultimately raise the pressure on a small number of family offices and proprietary trading shops to capitulate on their complacent length in gold," TD Securities wrote in a note.

(Reporting by Kavya Guduru in Bengaluru; Editing by Krishna Chandra Eluri)