Gold retained overnight gains in Asian trading on Wednesday on weakness in the dollar and equities, but investors remained cautious after Federal Reserve officials talked up the prospect of US interest rate increases this year.

FUNDAMENTALS

* Spot gold XAU= was little changed at $1,278.65 per ounce at 0042 GMT, after gaining 0.5 percent on Tuesday.

* U.S. gold futures GCcv1 rose 0.27 percent to $1,280.40.

* The dollar index .DXY, which measures the greenback against a basket of six major currencies, was nearly flat early Wednesday. The currency weakened against the yen on positive Japan economy data.

* Asian shares stepped back on Wednesday after strong US inflation data and comments from Fed officials rekindled the prospects of the central bank raising rates later this year.

* MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.3 percent in early trade, while Japan's Nikkei .N225 was little changed, held up by stronger-than-expected reading in Japan's April-June GDP. [MKTS/GLOB]

* Data on Tuesday showed US consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, pointing to a steady inflation build-up that could give the Fed ammunition to raise interest rates later this year. Other data showed housing starts and industrial production rebounded strongly last month.

* A US Federal Reserve policymaker said on Tuesday that he will push for an interest rate hike in June or July and two others still see up to three rate increases this year, leaving the door open to a change in monetary policy relatively soon.

* Gold has rallied 20 percent this year on speculation that the Fed has slowed its expected pace of rate increases on concerns over the volatility in global markets.

* SPDR Gold Trust (GLD), the world's largest gold-backed exchange-traded fund, said its holdings rose 0.56 percent to 855.89 tonnes on Tuesday, the highest since November 2013. [GOL/ETF]

* Investor appetite for palladium-backed exchange-traded funds is failing to pick up after a dismal 2015, pointing to another difficult year for the metal despite the prospect of a deepening supply deficit.

* For the top stories on metals and other news, click [TOP/MTL] or [GOL]

MARKET NEWS

* Oil prices rose for a second straight day on Tuesday, with U.S. futures hitting seven-month highs, on expectations of a drawdown in U.S. crude stockpiles and a new wildfire threat on Canadian oil supplies. [O/R]

DATA AHEAD (GMT)

0900 Euro zone Inflation, Final April

1100 US MBA Mortgage application weekly

2350  Japan machinery orders