PRECIOUS-Gold holds firm as soft US dollar, rate-cut bets lend support

By Brijesh Patel

Aug 28 (Reuters) - Gold held firm near a more than two-week peak on Thursday, supported by a weaker dollar and U.S. interest rate cut prospects as market participants awaited U.S. inflation data due this week.

Spot gold XAU= was steady at $3,394.60 per ounce, as of 0648 GMT. Earlier in the session, bullion touched its highest point since August 11.

U.S. gold futures GCcv1 for December delivery edged 0.1% higher to $3,451.60.

The dollar index .DXY fell 0.1% against its rivals, making gold less expensive for other currency holders. USD/

"We've got a lot of positive interest for gold because of that sort of issues with institutional trusts and risks about Fed's independence," said Kyle Rodda, Capital.com's financial market analyst.

Investors are now awaiting the release of the Personal Consumption Expenditures (PCE) Price Index, the preferred inflation measure of the U.S. Fed, scheduled for Friday.

"But we're really looking for something more sort of to push the price above critical level of $3,400 ... the U.S. PCE data will be super significant. We are still bullish on gold. I think all the fundamentals (are) moving in the right direction," he added.

Economists polled by Reuters expect the PCE price index USPCEY=ECI to rise 2.6% in July, matching the climb from June.

Markets are anticipating an over 88% chance of a 25-basis-point rate cut at the Fed's policy meeting next month, according to CME FedWatch Tool.

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

New York Fed Bank President John Williams said on Wednesday it is likely interest rates can fall at some point but policymakers will need to see what upcoming data indicate about the economy to decide if it's appropriate to make a cut next month.

Elsewhere, spot silver XAG= was up 0.6% at $38.86 per ounce, platinum XPT= gained 0.3% to $1,351.63 and palladium XPD= climbed 0.6% to $1,097.95.

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