By Sukanya Mitra

Aug 17 (Reuters) - Gold drifted higher on Monday, supported by a weaker dollar and recent soft economic data that ‌reduced expectations for a U.S. interest rate hike next month.

Spot ‌gold rose 0.4% to $4,391.49 per ounce by 0520 GMT. Prices hit a more-than-two-month high last ​week.

U.S. gold futures for December delivery edged 0.3% higher to $4,448.40.

The U.S. dollar index was down 0.2%, making greenback-priced metals more affordable for other currency holders. [USD/]

"Gold has taken the ball and run with it to start the week, with ‌soft inflation numbers keeping ⁠the U.S. dollar under pressure and giving gold extra headroom to push towards the $4,400 level," said Tim Waterer, chief ⁠market analyst at KCM Trade.

"A sustained move above $4,500 would likely need additional dollar weakness or a clearer pullback in energy prices." [O/R]

An unexpected decline in U.S. nonfarm ​payrolls in ​July, coupled with data showing only ​mild consumer price inflation, has ‌reduced expectations that the U.S. Federal Reserve will raise interest rates next month.

Traders are now pricing in a 30% chance of a September rate hike, down from 47% a month earlier, CME's FedWatch Tool showed.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion, enhancing its appeal ‌to investors.

Markets are now awaiting minutes of ​the Fed's July meeting, due on Wednesday, for ​further clues on policymakers' ​monetary stance.

On the geopolitical front, U.S. President Donald Trump's envoys ‌met with Egyptian, Qatari and Turkish ​mediators in Cairo ​on Sunday, a diplomatic source said, aiming to advance his Gaza peace plan, even as Israel pressed on with airstrikes in the ​enclave.

Among other metals, spot ‌silver rose 1.4% to $65.57 per ounce. Platinum fell 0.1% to $1,746.43, while ​palladium gained 1.4% to $1,331.10.

(Reporting by Sukanya Mitra and Ashitha Shivaprasad ​in Bengaluru; Editing by Rashmi Aich)