Gold prices rose on Thursday, hitting their highest level in more than one month, as the dollar weakened while investors awaited Friday's US inflation data for clues on Federal Reserve policy direction.

Spot gold rose 0.3% to $3,407.81 an ounce at 12:22 GMT, after hitting $3,408.62, its highest level since July 23, earlier in the session. US gold futures for December rose 0.5% to $3,466.30. The dollar index fell 0.3% against a basket of currencies, making gold more attractive to holders of other currencies.

Investors are awaiting Friday's release of the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation measure. Economists polled by Reuters expect the index (USPCEY=ECI) to rise 2.6% in July, matching June's reading.

"A bullish surprise would likely strengthen the dollar and increase Treasury yields, which would weigh on gold prices," said Ricardo Evangelista, senior analyst at ActivTrades. "An opposite outcome could fuel expectations that the Fed will be more dovish, weakening the dollar and supporting precious metals." The market is pricing in a more than 87% chance of a 25 basis point rate cut at the Fed's policy meeting next month, according to the CME FedWatch Tool.

Non-yielding gold typically performs well in a low-interest rate environment. New York Fed President John Williams said on Wednesday that interest rates could fall at some point, but policymakers need to consider upcoming data.

Traders are also closely monitoring US President Donald Trump's moves to assert control over the Fed. Earlier this week, Trump said he would fire Fed Chair Lisa Cook. "Many view this dispute as a threat to the Fed's independence and credibility, which supports precious metals," Evangelista said.

Elsewhere, spot silver rose 1.2% to $39.08 per ounce, platinum rose 0.2% to $1,349.22, and palladium rose 1.1% to $1,103.82. (alg)

Source: Reuters