PRECIOUS-Gold on track for best month in four as inflation data bolsters rate cut bets

By Anmol Choubey and Sarah Qureshi

Aug 29 (Reuters) - Gold prices held steady on Friday and were poised for their best monthly performance since April, as U.S. inflation data reinforced expectations that the Federal Reserve could cut interest rates next month.

Spot gold XAU= was up 0.5% at $3,433.99 per ounce, as of 10:20 a.m. ET (14:20 GMT). Bullion has gained 4.4% in August so far.

U.S. gold futures GCcv1 for December delivery rose 0.7% to $3,497.30.

The dollar .DXY held steady, but was set for a monthly drop of 2.1%. A lower dollar makes gold less expensive for overseas buyers. USD/

U.S. consumer spending increased solidly in July while underlying inflation picked up as tariffs on imports raised prices of some goods. The U.S. Personal Consumption Expenditures Price index rose 0.2% month-on-month, and was up 2.6% on a year-on-year basis - both in line with expectations.

"We have expectations of a Fed rate cut, or potentially two, throughout this year, (which is) generally supportive for commodity prices across the board, including gold and silver," said David Meger, director of metals trading at High Ridge Futures.

Non-yielding gold typically performs well in a low-interest-rate environment.

Meanwhile, a federal judge on Friday will consider whether to block President Donald Trump temporarily from firing Federal Reserve Governor Lisa Cook while she pursues a lawsuit claiming Trump has no valid reason to remove her.

"Gold is benefiting from this uncertainty (around Fed independence), as shown by inflows into gold ETFs of just under 15 tons in the last two days. Nevertheless, the upside for gold above $3,400 is looking increasingly limited," Commerzbank said in a note.

Spot silver XAG= added 0.2% to $39.14 per ounce and gained for the fourth straight month.

Platinum XPT= fell 0.9% to $1,347.77, but was on track for monthly gains, while palladium XPD= was also down 0.9% at $1,092.18, heading for a monthly loss.

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