Gold gains as Fed rate-cut optimism dents dollar

Gold prices edged higher on Monday, as rising expectations of a U.S. Federal Reserve interest rate cut this week pressured the dollar.

FUNDAMENTALS

* Spot gold was up 0.3% at $4,206.99 per ounce, as of 0118 GMT.


* U.S. gold futures for December delivery lost 0.2% to $4,236.30 per ounce.

* The U.S. dollar edged lower to hover near six-week lows touched on December 4, making greenback-priced gold cheaper for overseas buyers.

* U.S. consumer spending increased moderately in September after three straight months of solid gains, suggesting a loss of momentum in the economy at the end of the third quarter as a lacklustre labour market and rising cost of living curbed demand.

* This followed private payroll data showing the sharpest decline in more than two-and-a-half years last month.

* Dovish commentary from several Fed officials has further fuelled expectations of monetary easing.

* CME's FedWatch tool indicates an 88.4% probability of a 25-basis-point rate cut at the Fed's December 9-10 meeting. * Lower interest rates tend to favour non-yielding assets such as gold.

* On Thursday, data showed new U.S. unemployment benefit claims dropped to 191,000 for the week ended November 29, the lowest in more than three years and well below economists' estimate of 220,000.

* Elsewhere, silver was steady at $58.25 per ounce, platinum gained 0.3% to $1,646.56, while palladium slid 0.5% to $1,455.55.

DATA/EVENTS (GMT)

0700 Germany Industrial Output MM, YY SA Oct

0745 France Reserve Assets Total Nov.