Gold prices touched a nearly seven-month high on Wednesday, propelled by a decline in the U.S. dollar and bond yields as investors grew confident that the Federal Reserve would likely cut interest rates by the first half of next year.

Spot gold rose 0.2% to $2,044.69 per ounce by 0632 GMT, after hitting its highest since May 5. U.S. gold futures for December delivery rose 0.3% to $2,045.30 per ounce.

"Gold is driven by an increasing market expectation of a Fed pivot from a hawkish tilt to a dovish tilt in the first half of next year - earlier than it did before," said Kelvin Wong, senior market analyst for Asia Pacific at OANDA.

"The key point to look for is the PCE (personal consumption expenditures) data and markets are expecting another slowdown in U.S. inflationary pressure."

Fed Governor Christopher Waller on Tuesday flagged a possible rate cut in the months ahead.

Traders are now pricing in a more than 70% chance of rates easing in May, compared with a 50% chance on Tuesday, CME's FedWatch Tool shows.

Lower rates reduce the opportunity cost of holding non-interest-bearing bullion.

Investors' attention is now on the revised U.S. third-quarter GDP figures due at 1330 GMT and key PCE data - Fed's preferred inflation gauge - on Thursday.

Making gold less expensive for other currency holders, the dollar index hit a more than three-month low against its rivals, and was poised to mark its worst monthly performance in a year. Yields on 10-year Treasury notes fell to an over two-month low of 4.2629%.

Spot gold may extend gains into a range of $2,059-$2,069 per ounce, Reuters technical analyst Wang Tao said. Spot silver fell 0.2% to $24.96 per ounce and platinum slipped 0.3% to $936.78. Palladium rose 0.2% to $1,056.62 per ounce.

(Reporting by Harshit Verma in Bengaluru; Editing by Rashmi Aich and Mrigank Dhaniwala)