Gold prices trade above USD 3,600 on Fed rate-cut bets

Gold prices hovered near a record high on Tuesday, holding firm above the USD 3,600 level, as growing expectations for a US Federal Reserve interest rate cut this month lifted demand for the precious metal.

FUNDAMENTALS

* Spot gold was up 0.1% at USD 3,640.41 per ounce, as of 0103 GMT. Bullion rose to a record high of USD 3,646.29 on Monday.

* US gold futures for December delivery edged 0.1% higher to USD 3,682.

* US job growth weakened sharply in August and the unemployment rate increased to a nearly four-year high of 4.3%, confirming that labor market conditions were softening and sealing the case for a Fed rate cut next week.

* Traders are pricing in an 89.4% chance of a 25-basis-point rate cut at the Fed’s September meeting and a 10.6% probability of a jumbo 50-basis-point rate cut, according to the CME Group’s FedWatch tool.

* Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

* The dollar index fell to an almost seven-week low against its rivals, making gold more attractive for other currency holders, while the benchmark US 10-year yield dropped to a five-month low.

* Meanwhile, the European Central Bank is widely expected to hold rates at its policy meeting on Thursday.

* Investors are now awaiting US producer price data on Wednesday and consumer prices on Thursday for further clues on the Fed’s policy path.

* Gold prices have gained 38% so far this year, following a 27% jump in 2024, bolstered by soft dollar, strong central bank accumulation, dovish monetary settings and heightened global uncertainty.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.23% to 979.68 tons on Monday from 981.97 tons on Friday

* Elsewhere, spot silver was flat at USD 41.31 per ounce. Platinum gained 0.3% to USD 1,387.20 and palladium climbed 0.8% to USD 1,142.64.

(Reporting by Brijesh Patel in Bengaluru; Editing by Sherry Jacob-Phillips)