* U.S. overall CPI up 0.3% in August

* Supply chain weakness affecting platinum, palladium demand – analyst (Recasts, adds comment and updates prices)

Sept 14 (Reuters) – Gold steadied on Tuesday, shaking off initial declines as the dollar retreated after a slower-than-expected rise in U.S. inflation cast doubts over the U.S. Federal Reserve’s tapering timeline.

Spot gold was steady at $1,793.20 per ounce by 1408 GMT, and U.S. gold futures were also nearly flat at $1,795.00 per ounce.

The U.S. Labor Department said on Tuesday its Consumer Price Index excluding the volatile food and energy components edged up 0.1% last month, missing expectations of 0.3%. That was the smallest gain since February and followed a 0.3% rise in July.

This miss is a “good news for bullion”, making a September taper announcement from the Fed less likely, said Ed Moya, senior market analyst at brokerage OANDA.

The Federal Open Market Committee (FOMC) is scheduled to next meet on Sept. 21-22.

Right now the gold market is still in a flux, given its inability to stab above the $1,800 level and could likely keep consolidating going into the FOMC meeting, Moya added.

The recent data could reinforce the view that the Fed may go slow on unwinding economic support measures and keep interest rates low, translating into reduced opportunity cost for holding non-interest bearing bullion.

The inflation data comes on the heels of comments from several Fed officials that the central bank should begin tapering asset purchases this year.

Among other metals, palladium fell more than 5% to over one-year low $1,967.23 and platinum fell 2.4% to $937.45.

“Supply chain weakness effecting particularly chips and car manufacturing is having a depressing effect on the platinum group metals,” independent analyst Ross Norman said, adding that while the supply disruptions persist, prices were likely to be pressured.

Silver fell 0.4% to $23.63 per ounce. (Reporting by Bharat Govind Gautam and Nakul Iyer in Bengaluru; Editing by Vinay Dwivedi)

Read More