July 3 (Reuters) - Australian shares advanced on Monday led by gold and mining stocks, although investors exercised caution ahead of the central bank's July policy meeting amid stubbornly high inflation.

The S&P/ASX 200 index rose 0.1% to 7211.3 by 0014 GMT. The benchmark ended 0.1% higher on Friday.

The Reserve Bank of Australia (RBA) is widely expected to hike interest rate by 25 basis point to 4.35%, though a Reuters poll of economists showed the decision to hike or hold was on a knife's edge.

Inflation in Australia has been reeling well above RBA's set target range of 2%-3%, highlighting a requirement for further monetary policy tightening.

Gold stocks advanced 2.14%, buoyed by a rise in bullion prices.

The country's largest gold miner Newcrest Mining jumped 2.2%, marking its best day in more than four weeks.

Musgrave Minerals advanced 15.8% after the gold miner revealed bigger rival Ramelius Resources made an off-market offer to acquire the company for A$201 million ($133.91 million).

Local miners followed suit to add 0.8%, with mining trio BHP, Rio Tinto and Fortescue Metals gaining between 0.1% and 0.5%, respectively.

NRW Holdings jumped as much as 2.8% after signing a A$973 million contract to design and construct the processing plant facilities at Northern Star Resources' KCGM growth project.

Separately, United Malt surged 9.1% in its best session in nearly 14 weeks after the malster agreed to a $1 billion takeover offer from Malteries Soufflet, a branch of French agribusiness InVivo.

Bucking the trend, banking stocks slipped 0.2%, snapping a four-day rally.

Financial conglomerate Macquarie gave up 0.1% to mark its worst day since June 26.

New Zealand's benchmark S&P/NZX 50 index slipped 0.1% to 11907.75. ($1 = 1.5020 Australian dollars) (Reporting by Roushni Nair in Bengaluru; Editing by Rashmi Aich)