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Gold prices edged higher on Thursday, buoyed by a weaker dollar and escalating tensions in the Middle East, while investors await more U.S. economic data that could shed light on the Federal Reserve's interest rate outlook.

Spot gold was up 0.1% at $2,026.7 per ounce, as of 0328 GMT, after hitting its highest since Feb. 9 on Wednesday. U.S. gold futures edged 0.1% higher to $2,036.9 per ounce.

The dollar index extended losses for the fourth straight day, turning the greenback-priced bullion more appealing to overseas buyers. [USD/]

"The short-term outlook for gold is mixed, with delays to the rate-cutting timeline being somewhat countered by safe-haven demand from the geopolitical picture," said Tim Waterer, chief market analyst at KCM Trade.

Israel intensified its bombardment of Rafah in Gaza's south and over a dozen members of one family were killed in an air strike, as the ruined Palestinian enclave's health ministry announced 29,313 deaths in the war so far.

"We have a raft of manufacturing and services data due today and any signs of economic weakness could spark hope that rate cuts could be on the way, which may assist gold," Waterer said.

Initial jobless claims data is due at 1330 GMT, while flash U.S. manufacturing and flash U.S. services data is scheduled for 1445 GMT.

Minutes of the Fed's latest policy meeting released on Wednesday showed that bulk of policymakers were concerned about the risks of cutting interest rates too soon.

January inflation data, with consumer and wholesale prices rising faster than anticipated, complicate upcoming U.S. central bank interest rate decisions, Richmond Fed president Thomas Barkin said.

Markets are currently pricing in a 72% chance of a cut in June, according to the CME Fed Watch Tool. Lower interest rates boost the appeal of holding non-yielding bullion.

Elsewhere, spot platinum was up 0.3% at $885.30 per ounce, palladium rose 0.6% to $955.63 and silver gained 0.1% to $22.89 per ounce.