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Gold prices climbed on Thursday to a nine-week peak on a weaker dollar and bets that the U.S. Federal Reserve might soon hit pause on its interest rate hiking cycle.

Spot gold was up 0.5% at $1,987.18 per ounce by 0325 GMT, its highest since mid-May. U.S. gold futures were up 0.4% to $1,988.80.

"We are bullish gold from here as we are likely to reach the end of Fed rate hikes at the next FOMC (Federal Open Market Committee) meeting (26 July)," said Baden Moore, head of carbon and commodity strategy at National Australia Bank, adding that the market was also focusing on potential rate cuts.

Lower interest rates help bullion as it reduces the opportunity cost of holding non-yielding bullion.

Additionally, the dollar index was 0.2% lower, close to an over one-year low, making gold cheaper for holders of other currencies. [USD/]

The Fed is expected to raise rates by 25 basis points (bps) at its meeting next week, keeping them in the 5.25%-5.5% range in 2023, according to CME's Fedwatch tool.

Investors will keep an eye out for initial jobless claims data in the U.S. later in the day for the week of July 15, forecast to rise to 242,000 from a seasonally adjusted 237,000.

"U.S. jobless claims have been rising over the 2Q – the market is expecting a sideways move – I think if we see jobless claims flat to higher I'd expect a positive move on gold," Moore said.

Data showed holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.19% to 913.80 tons on Wednesday. [GOL/ETF]

In Asia, the yuan rose after China left its lending benchmarks unchanged, yet raised the cross-border macro prudential adjustment ratio for corporates and financial institutions. [CNY/]

Asian stocks gained and the sterling stumbled as cooling UK inflation lifted risk appetite. [MKTS/GLOB]

Spot silver rose 0.3% to $25.23 per ounce, platinum advanced 0.1% to $973.81 while palladium fell 0.2% to $1,305.54.