Gold prices edged lower on Wednesday, dragged down by higher U.S. Treasury yields ahead of U.S. consumer price data due later in the day, which is expected to show a sharp rise in annual inflation.

Spot gold was down 0.2% at $1,833.60 per ounce by 0858 GMT. U.S. gold futures eased 0.1% to $1,833.70

The much-anticipated U.S. consumer price data is forecast to show a 3.6% lift in year-on-year prices.

"If the inflation comes in stronger, that's going to increase fears over a quicker than expected policy tightening from the Federal Reserve. That could cause yields to rise and increase the opportunity cost of holding gold," said Fawad Razaqzada, market analyst with ThinkMarkets.

"Whereas, if the numbers come in weaker then we may see gold rise to $1,850, which is a key level of resistance from where we also have the 200-day moving average come into play."

Higher inflation will likely add pressure on the Fed to bring forward rate rises, and weigh on gold, which bears no interest.

Some investors view gold as a hedge against higher inflation that could follow stimulus measures, but higher Treasury yields have weighed on non-yielding bullion's appeal this year.

Benchmark U.S. 10-year Treasury yields scaled a more than one-week peak.

"Gold has been under pressure by rising real rates in the past six months. That said, while there is uncertainty over the Fed's appetite to let nominal rates increase, a pick-up of inflation will likely bring new buyers into the market," BofA said in a research note.

Meanwhile, palladium rose 0.2% to $2,941.96 per ounce. Silver dropped 1% to $27.34 per ounce, while platinum fell 0.2% to $1,233.38

(Reporting by Nallur Sethuraman in Bengaluru; editing by Carmel Crimmins) ((Sethuraman.NR@thomsonreuters.com; (+91 8061822737); Reuters Messaging: nallur.sethuraman.thomsonreuters.com@reuters.net))