Gold plunged below key support level on Wednesday following a higher-than-anticipated January inflation rate stoked concerns that Fed will likely hold interest rates higher for an extended period.

Spot gold inched down to $1,992.64 per ounce, while gold futures slumped by 0.1% to $2,005.05 per ounce.

Spot prices for the yellow gold fell below the volatile $2,000 per ounce, resulting in prolonged losses for the yellow metal.

Gold stretched its losses following the dip of spot prices below the closely monitored support level of $2,000 per ounce, where analysts cautioned of the possibility of further drops following the loss of key support level.

CPI on Tuesday rose beyond projections in January, confirming previous Fed concerns that sticky inflation will prevent the bank from lowering interest rates.

However, the likelihood of longer-term increases is unfavourable for gold, considering that purchasing the yellow metal has a larger opportunity cost due to higher rates.