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Gold prices on Monday drifted higher from a two-week low hit in the previous session as traders gauged fading hopes of U.S. interest rate cuts ahead of a key inflation report due later this week.

Spot gold was up 0.5% at $2,346.31 per ounce, as of 0331 GMT, having touched its lowest since May 9 at $2,325.19 on Friday. U.S. gold futures rose 0.6% to $2,347.60.

Bullion hit a record high of $2,449.89 earlier last week, but has shed more than $100 since then.

"I suspect gold can manage a small bounce from current levels before retesting the $2,280-$2,300 zone, which could see losses extended if U.S. data continues to outperform," said City Index senior analyst Matt Simpson.

The core personal consumption expenditures price index (PCE), the preferred inflation measure for the U.S. Federal Reserve, is due on Friday.

Bullion is known as an inflation hedge, but higher rates increase the opportunity cost of holding non-yielding gold.

"With bullish fingers being burned at the highs and forcing some to liquidate and others to switch to the bear-camp, I doubt we'll see a new high soon with the Fed maintaining their 'higher-for-longer' narrative with interest rates," City Index's Simpson said.

Minutes from the Federal Reserve's meeting published last week showed the central bank's path to 2% inflation could take longer than expected.

Traders' bets indicated rising scepticism that the Fed will lower rates more than once in 2024, currently pricing in about a 63% chance of a rate cut by November according to the CME FedWatch Tool.

Spot silver rose 1.6% to $30.81, platinum climbed 1.3% to $1,039.20 and palladium gained 1.7% to $980.00.