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Gold prices rose on Wednesday after the dollar and bond yields retreated as investors awaited U.S. inflation data that could offer more cues on the Federal Reserve's rate-hike policy path.

Spot gold rose 0.4% to $1,940.53 per ounce by 0231 GMT, its highest since June 20.

U.S. gold futures were up 0.5% at $1,946.00.

Making gold cheaper for holders of other currencies, the dollar index fell 0.2% to its lowest level since May 11. Benchmark 10-year U.S. Treasury yields also slipped to their lowest in nearly a week. [USD/][US/]

"There has been some renewed confidence in gold prices lately, given the broad expectations for the upcoming U.S. CPI to reflect further moderation in pricing pressures," said Yeap Jun Rong, market strategist at IG.

Economists polled by Reuters expect inflation data for June, due at 1230 GMT, rising by 3.1%, after May's 4% jump, which would be the lowest reading since March 2021. Core rates are expected to have dropped to 5% from 5.3%, still significantly above the Fed's 2% target rate.

Markets see a 92% chance of the Fed raising rates by 25 basis points at their policy meeting on July 25-26, as per CME's Fedwatch tool.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

While a few Fed members said on Monday the central bank was close to ending its monetary policy tightening, Fed Bank of New York President John Williams reiterated that the central bank was not done raising its short-term rate target on Tuesday.

Yet given that a 25 bps hike is largely priced in, along with the broader trend for inflation headed to the downside, "a significant beat in inflation numbers (could) drive a pronounced recalibration in rate pricing," Rong said.

Spot silver gained 0.7% to $23.26 per ounce, platinum rose 0.5% to $929.21 while palladium was up 0.2% at $1,253.61.