Gold prices touched their highest levels in nearly seven months on Wednesday, thanks to a decline in the dollar and US bond yields, with investors growing more confident that the Federal Reserve will lower interest rates during the first half of next year.

By 06:32 GMT, gold in instant transactions rose 0.2 percent to $2,044.69 per ounce, after reaching its highest levels since May 5. US gold futures for December delivery rose 0.3 percent to $2,045.30 an ounce.

The CME Group's Fed Watch tool showed that traders now expect a probability of more than 70 percent that the US Federal Reserve will decide to cut interest rates in May, compared to a 50 percent probability on Tuesday.

Lower interest rates reduce the opportunity cost of holding non-yielding gold.

Investors' attention is now on revised third-quarter US GDP numbers due on Wednesday, and headline personal consumption expenditures data, the central bank's preferred measure of inflation, on Thursday.

The dollar index reached its lowest level in more than three months against its competitors, which makes gold less expensive for holders of other currencies, and the index is about to record its worst monthly performance in a year.

The yield on 10-year Treasury bonds fell to the lowest level in more than two months, at 4.2629 percent.

As for other precious metals, silver fell in spot transactions 0.2 percent to $24.96 per ounce, platinum fell 0.3 percent to $936.78, while palladium rose 0.2 percent to $1,056.62 per ounce.