Gold rose on Wednesday as expectations of a U.S. Federal Reserve interest rate cut in September gained traction following mild inflation data, while a weaker dollar bolstered bullion's demand.

Gold fluctuated as traders weighed the US Federal Reserve’s interest rate path after a modest rise in the cost of US goods tempered concerns about tariff-driven price pressures.

Fed-funds futures traders were pricing in a 51% likelihood on Tuesday that the central bank will cut rates in three quarter-point increments by December, up from 45% a day ago, according to the CME FedWatch Tool.