Gold prices continued higher on Wednesday, as investors looked ahead to U.S. inflation data to gauge how it will impact the Federal Reserve's view on monetary policy in the months ahead.

Comex gold futures were up around $6.00, or 0.4%, at $1,335.80 a troy ounce by 3:40AM ET (0840GMT). It reached its best level since Feb. 6 at $1,339.40 earlier in the session.

Gold futures scored back-to-back gains as the dollar weakened Tuesday. Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

The greenback's downward trend continued in early trade Wednesday. Against a basket of six major rival currencies, the dollar was a shade lower at 89.50, while the yield on the 10-year Treasury note eased back to around 2.83%.

Looking ahead, the Commerce Department will publish January inflation figures at 8:30AM ET (1330GMT). Market analysts expect consumer prices to rise 0.3%, faster than December’s 0.1% increase, while core inflation is forecast to inch up 0.2%, a touch slower than December when consumer prices recorded their largest increase in 11 months.

Rising inflation would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently expected.

At the same time Wednesday, the Commerce Department will publish data on retail sales for January. The consensus forecast is that the report will show retail sales increased 0.5% last month. Core sales are forecast to gain 0.2%.

The Fed held interest rates unchanged last month and raised its inflation outlook, signaling that borrowing costs will continue to climb under new central bank chief Jerome Powell. Traders are currently putting the chances of a 25-basis-point hike by the Fed at its March meeting at around 76%, according to Investing.com's Fed Rate Monitor Tool.