Gold prices jumped more than 1% on Thursday to break above the $2,400 per ounce level after data showed U.S. consumer prices unexpectedly slipped last month, boosting bets for interest rate cuts by the Federal Reserve.

Spot gold was up 1.5% at $2,406.99 per ounce by 05:56 a.m. ET (1256 GMT), its highest since May 22. U.S. gold futures rose 1.4% to $2,412.60.

"Gold surges above $2,400 as the friendly CPI number nearly cements a September rate cut. Gold bulls are likely to push for a new all-time high perhaps as soon as next week," said Tai Wong, a New York-based independent metals trader.

U.S. consumer prices unexpectedly fell and the annual increase was the smallest in a year, reinforcing views that the disinflation trend was back on track and drawing the Fed another step closer to cutting interest rates.

Interest-rate futures prices reflected about an 85% chance of a rate cut at the Fed's September meeting, compared with about a 70% chance seen before the data.

Non-yielding bullion's appeal tends to shine when interest rates fall.

Following the U.S. inflation data, the dollar dropped to a more than one-month low, making gold more attractive for other currency holders, while the benchmark U.S. 10-year Treasury yield fell to a four-month low.

Fed Chair Jerome Powell, over his two days of commentary before the Senate and House committees that oversee the central bank, indicated the Fed was edging closer to a rate cut decision.

"Given the overall trajectory on monetary policy and gold demand I think the bull run is not over yet," said Zain Vawda, market analyst at MarketPulse by OANDA.

Meanwhile, spot silver climbed 2.7% to $31.63 per ounce, its highest since May 31. Platinum rose 1.9% to $1,008.35 and palladium gained 1.6% at $1,002.54.

(Reporting by Brijesh Patel in Bengaluru; Editing by Shounak Dasgupta)