Gold prices rose 1% on Wednesday after a surprisingly soft U.S. consumer inflation report raised hopes for an interest rate cut in 2024, while investors awaited the release of the Federal Reserve's latest policy statement and economic projections.

Spot gold was up 1% at $2,338.59 per ounce as of 1311 GMT. U.S. gold futures rose 1.2% to $2,335.50.

The headline consumer price index was flat on a month-on-month basis in May, below expectations for a 0.1% gain. Core prices rose 0.2%, also below economists' projections for a 0.3% increase.

In the 12 months through May, the CPI advanced 3.3% after increasing 3.4% in April. Economists polled by Reuters had forecast the CPI would gain 3.4% on a year-on-year basis in May as well.

The data "puts two rate cuts back on the table ... that's what helps gold, because lower interest rates will help non-interest bearing assets such as gold," said Chris Gaffney, president of world markets at EverBank, adding that the drop in the dollar due to lower interest rate expectations is also supporting the price of gold.

The dollar index was down 0.7%, and benchmark U.S. 10-year Treasury yields dropped to their weakest levels since April 1.

Traders raised their bets to price in 50 basis points of Fed policy easing (bps), or two-quarter-percentage cuts by the end of this year, from 40 bps before the CPI data. Bets of a rate cut at the Fed's meeting in September rose to about 70% from around 54% prior to the data.

Attention will now be on the U.S. central bank's release at 2 p.m. EDT (1800 GMT) of its policy statement and updated quarterly economic projections. Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. EDT.

Spot silver rose 3.2% to $30.19 per ounce, platinum rose 2.2% at $972.60 and palladium gained 4.8% to $926.25.

(Reporting by Harshit Verma and Rahul Paswan in Bengaluru; Editing by Paul Simao)