Jan 18 (Reuters) - Gold prices rose on Wednesday as the dollar and bond yields weakened after data showing signs of cooling U.S. inflation cemented bets the Federal Reserve will slow its rate hikes.

Spot gold was up 0.8% at $1,923.92 per ounce by 9:36 a.m. ET (1436 GMT), after hitting a session low of $1,896.32 earlier.

U.S. gold futures also gained 0.8% to $1,925.20.

U.S. producer prices fell more than expected in December as the costs of energy products and food declined, offering more evidence that inflation was slowing.

With the PPI data coming in a little tamer than expected, the Fed might back off its accelerated monetary policy tightening path, said Jim Wyckoff, senior analyst at Kitco Metals.

Traders' bets of a 25-basis point rate hike by the Fed in February rose to 94.7% after the data, with the terminal rate now seen at 4.88% by June.

Lower interest rates tend to be beneficial for bullion, decreasing the opportunity cost of holding the non-yielding asset.

However, Bank of St. Louis President James Bullard in a Wall Street Journal interview said he saw rates in the 5.25%-5.5% range at the end of 2023.

Following the PPI data, the dollar fell 0.8% to near an eight-month low, making gold more attractive for other currency holders. Benchmark 10-year U.S. Treasury yields dropped to a four-month low.

"Recession worries and the Fed's policy decision would be the major catalysts for prices in the near future," said Hareesh V, head of commodity research at Geojit Financial Services.

Meanwhile, Japanese policymakers decided to keep yield curve controls in place, causing bond yields to fall the most in two decades at one point on Wednesday.

Elsewhere, spot silver gained 1.4% to $24.26 per ounce, platinum shot up 3.3% to $1,073.25 while palladium rose 2.8% to $1,791.75.