Updates after US CPI data

By Ashitha Shivaprasad

July 14 (Reuters) - Gold gained more than 2% on Tuesday after softer-than-expected inflation data boosted hopes of the U.S. Federal Reserve adopting a less hawkish stance.

Spot gold XAU= rose 2.1% to $4,083.99 per ounce by 8:49 a.m. EDT (1249 GMT), after falling to its lowest level since July 1 earlier in the session.

U.S. gold futures GCcv1 gained 2.2% to $4,091.80.

The U.S. dollar fell 0.6%, making greenback priced-bullion more affordable for other currency holders. USD/

"Gold gallops higher on a surprisingly subdued CPI report that saw headline dive lower but more importantly, core unchanged versus 0.2%. This should drop rate hike expectations sharply at least for the July and September meetings," said Tai Wong, an independent metals trader.

U.S. consumer inflation slowed more than expected in June. The Consumer Price Index increased by 3.5% in the 12 months through June after surging 4.2% in May, while core CPI inflation was unchanged over the month, after gaining 0.2% in May.

After the data, traders exited bets that the Fed would hike rates at its July 28-29 meeting.

Focus is also on remarks from Fed Chair Kevin Warsh, who is scheduled to deliver the central bank's semi-annual monetary policy report to Congress at 10 a.m. ET.

Investors will also be watching the U.S. Producer Price Index (PPI) data, due on Wednesday.

On the geopolitical front, Iran fired ballistic missiles at a U.S. air base in Jordan and the United States attacked Iranian targets for five hours in a battle for control of the Strait of Hormuz that has pushed up oil prices to four-week highs. O/R

"The resumption of serious hostilities with Iran will have headline inflation already higher this month, so gold's rally will be tempered to $4,200 over the next few sessions and perhaps $63-$64 in silver isn't out of the question," Wong said.

Higher inflation could prompt central banks to keep interest rates elevated for longer, weighing on non-yielding assets such as gold.

Among other metals, spot silver XAG= rose 2.2% to $58.89 per ounce, platinum XPT= added 1.4% to $1,629.92 and palladium XPD= climbed 2.4% to $1,275.73.