Gold prices extended gains Wednesday after Federal Reserve Chair Jerome Powell hinted that an interest rate cut could be on the table as early as September if inflation stays in line with expectations.

Spot gold was up 1.2% at $2,437.39 per ounce as of 3:21 p.m. ET (1921 GMT) and logged its biggest monthly rise since March, gaining over 4%. U.S. gold futures settled 0.9% higher at $2,473.

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Powell, speaking at a press conference following the Fed's decision to leave its benchmark interest rate unchanged, kindled investors' hopes for a September rate cut by stating that policymakers are gaining more confidence that inflation is steadily approaching the 2% target.

"Gold and silver are rallying as Chair Powell's comments indicate a September rate cut is likely," said Tai Wong, a New York-based independent metals trader.

"However, he did effectively close the door on a 50bps move. It remains to be seen if gold can make new all-time highs given the Fed has just met recently expanded expectations."

Support for the safe-haven asset strengthened amid the threat of conflict escalation in the Middle East after Hamas leader Ismail Haniyeh was assassinated early on Wednesday in Iran spurring a region already shaken by the war in Gaza and a deepening conflict in Lebanon.

Fed cuts rates coupled with geopolitical risk in the Middle East could potentially push gold to up to $2700 an ounce, said Bob Haberkorn, senior market strategist at RJO Futures.

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The U.S. dollar slightly pared losses after the Federal Reserve rate decision, while the benchmark U.S. 10-year Treasury yields moved lower.

Spot silver was up 1.6% at $28.85 per ounce. Platinum gained 2.1% to $979.05 and palladium climbed 4.6% to $928.50. All three metals were headed for monthly declines.