(Recasts throughout, updates prices, adds comments)
* Gold holds near 1-month low
* Silver drops to lowest since Jan 2016
* U.S. consumer prices post biggest gain in 9 months
By Swati Verma and Karthika Suresh Namboothiri
BENGALURU, Nov 14 (Reuters) - Gold inched lower on Wednesday, but moved in a tight range around the $1,200 level as prospects of rising U.S. interest rates kept the dollar within sight of a 16-month peak, making bullion more expensive for holders of other currencies.
Spot gold was down 0.1 percent at $1,201.31 per ounce at 11:16 a.m. EST (1616 GMT). Prices had slipped to their lowest since Oct. 11 at $1,195.90 in the previous session. U.S. gold futures gained 0.1 percent to $1,202 per ounce.
Declines in gold were, however, tempered by a slight retreat in the dollar index, which measures the greenback against major currencies, after data showed U.S. consumer prices grew in line with forecasts in October, reinforcing the view domestic inflation is increasing at a moderate pace.
"The key driver in the near term continues to be currency movements," said Suki Cooper, precious metals analyst at Standard Chartered Bank.
However, factors including increased buying by central banks, return of interest amongst exchange traded fund (ETF) investors and seasonal demand for physical gold "are acting as a cushion to the downside," she added.
Holdings of the world's largest gold-backed ETF, SPDR Gold Trust, remained near their highest level in more than two months.
Concerns about a possible slowdown in global economic growth, exacerbated by disappointing data from Germany, weighed on stock markets, but that has not translated into moves into gold, which is considered a safe store of value during times of political or economic uncertainty.
Bullion has fallen about 12 percent from a peak in April as investors flocked to the dollar instead, with U.S.-China trade friction unfolding against a background of higher U.S. interest rates.
"It has been the strength in the U.S. dollar... Prices have continued to sway on that. There is nothing that has set gold in motion in terms of being a haven investment or moving higher," said Jeff Klearman, portfolio manager at GraniteShares.
The dollar has benefited over the last week from expectations for further U.S. interest rate hikes, as well as concerns over Italy's budget and ongoing Brexit talks.
The U.S. central bank is expected to increase rates in December for a fourth time this year. Rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion.
Among other precious metals, silver rose 0.4 percent to $14.03 per ounce, having matched its lowest since Jan. 21, 2016, at $13.85 earlier. "With so much silver around and lack of investment, nobody really cares about silver right now. There is so much above ground inventory that is causing silver prices to fall," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
Palladium jumped about 2 percent to $1,131.40 per ounce, while platinum was down 0.6 percent at $829.99 an ounce. (Reporting by Swati Verma, Karthika Suresh Namboothiri and Arpan Varghese in Bengaluru Editing by Chizu Nomiyama)