Gold recovered from earlier losses and edged higher on Wednesday, after US producer prices unexpectedly fell in June, despite persistent concerns about inflation and high interest rates amid escalating tensions in the Middle East.

Spot gold steadied at $4,057.34 per ounce by 17:40 GMT, after falling about 1% earlier in the session. US gold futures for August delivery fell 0.4% to $4,051.80.

Philip Streible, chief market analyst at Blue Line Futures, said: "Gold pared its losses from earlier in the morning after the producer price index came in lower than expected, easing some concerns that the Federal Reserve will raise interest rates multiple times this year."

The Labor Department's Bureau of Labor Statistics reported that the producer price index for final demand fell 0.3% last month, following a downwardly revised 0.6% increase in May. Economists polled by Reuters had expected the index to remain unchanged, after a previously reported 1.1% rise in May.

The CME Group's FedWatch tool showed that traders now see about a 10.2% probability of a rate hike at the Federal Reserve's July meeting, compared to 16.6% before the data release. Data on Tuesday also showed that US consumer price inflation slowed more than expected in June.

On the geopolitical front, the United States announced a new wave of strikes against Iran after reimposing a naval blockade on its ports, while Tehran threatened to further restrict regional energy exports, pushing oil prices to continue their gains. Higher fuel costs are likely to keep inflationary pressures elevated, prompting central banks to keep interest rates higher for longer, which diminishes gold's appeal as a non-yielding asset.

Among other precious metals, spot silver fell 1.8% to $57.55 per ounce, while platinum rose 0.9% to $1,646.47, and palladium fell 0.9% to $1,293.58.