Dec 4 (Reuters) - Australian shares on Monday hit their highest in 2-1/2 months, as traders found comfort in signs that the U.S. central bank was done with its monetary tightening, while investor focus was also on the Reserve Bank of Australia's policy meeting due this week.

The S&P/ASX 200 index was up 1.2% at 7,157.700 points, as of 0052 GMT, hitting its highest level since Sept. 20. The benchmark closed 0.17% lower on Friday.

On Friday, Federal Reserve Chair Jerome Powell said "the risks of under- and over-tightening are becoming more balanced," but the U.S. central bank is not thinking about lowering rates right now.

Additionally, the U.S. inflation data on Dec. 1 revealed indications of declining demand in the world's biggest economy, adding credence to the belief that the Fed's campaign of interest rate hikes was coming to an end.

Back in Sydney, investors are keenly watching out for the RBA's final meeting of the year on Dec. 5.

Traders expect the RBA to keep its key interest rate unchanged at 4.35% and a rate cut is now not expected to happen until the fourth quarter of next year due to a strong housing market, according to a Reuters poll.

Australian gold stocks led gains in the benchmark index, rising 3.8%, hitting their highest level since May 10. Top gold miners Northern Star Resources and Evolution Mining rose 4% and 3.6%, respectively.

Heavyweight miners added to the gains by rising 2.2%, their highest level since Aug. 4, with sector major BHP Group up 2.2%, while Rio Tinto advanced 1.9%.

Rate-sensitive financials were up nearly 1%, set for their best day since Oct. 18, and the "Big Four" banks up between 0.4% and 0.8%.

Technology stocks climbed 2.1%, their highest level since Nov. 9.

New Zealand's benchmark S&P/NZX 50 index remained largely flat at 11,372.5200 points.

(Reporting by Adwitiya Srivastava in Bengaluru; Editing by Sherry Jacob-Phillips)