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Gold jumped 1% on Monday bolstered by a weaker dollar, while investors positioned for key inflation data as they assess the pace of future interest rate hikes by the U.S. central bank.

Spot gold rose 0.6% to $1,726.39 per ounce by 1359 GMT, after rising to its highest since Aug. 30 at $1,733.69.

U.S. gold futures gained 0.5% to $1,737.20.

European Central Bank officials have signalled further rate hikes to rein in inflation, which has supported the euro and pressured the U.S. dollar and is in part responsible for some strength in the gold market, said David Meger, director of metals trading at High Ridge Futures.

The dollar index touched its lowest level since Aug. 26, helping gold gain for a second consecutive session by making it more attractive for overseas buyers. [USD/]

ECB policymakers signalled an increasing risk they will have to raise their key interest rate to 2% or more to curb record-high inflation in the euro zone despite a likely recession.

Investors also braced for the U.S. Consumer Price Index, which is due on Tuesday and is expected to show August prices rose at an 8.1% pace over the year, versus an 8.5% print for July. [USCPNY=ECI]

"We may be seeing traders position for a favourable U.S. inflation report tomorrow which could provide a bigger lift again if we see further softening," Craig Erlam, senior market analyst at OANDA.

Gold is traditionally considered an inflation hedge, but rate hikes translate into a higher opportunity cost for holding bullion, which pays no interest.

Among other precious metals, spot silver gained over 5% to its highest since Aug. 18.

"We're seeing a dramatic short covering rally in the silver market, there's a significant amount of buying," Meger added.

Palladium was up 3.7%, after having touched its highest since Aug. 12 at $2,262.18.

Platinum rose 2.1% to $899.27.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Krishna Chandra Eluri)