Gold prices drift higher ahead of US payrolls data

Gold prices rose on Thursday, building on the previous session's gains as investors awaited U.S. non-farm payrolls data that could determine whether interest rates will be cut earlier than expected this year.

FUNDAMENTALS

* Spot gold was up 0.4% at $2,365.40 per ounce, as of 0121 GMT, after a more than 1% gain on Wednesday. U.S. gold futures rose 0.4% to $2,384.50.


* The dollar index inched down 0.1%, while benchmark U.S. 10-year Treasury yields lingered near a two-month low, making bullion more attractive to investors.

* U.S. private payrolls increased less than expected in May, while data for the prior month was revised lower.

* Investors now await the non-farm payrolls data due on Friday to gauge the U.S. economy's health and if it will deter the Federal Reserve from cutting rates in September.

* The Fed will cut its key interest rate in September and once more this year, according to a majority of forecasters in a Reuters poll that also showed a significant risk they opt for only one or none at all.

* Traders are currently pricing in about a 70% chance of a rate cut in September, according to CME FedWatch tool.

* Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

* Meanwhile, the European Central Bank was all but certain to cut rates from record highs and was likely to acknowledge it had made progress in its battle against high inflation, while also stressing the fight was not yet over.

* Russia's finance ministry said it would reduce its purchases of foreign currency and gold in the month ahead, a move that will increase the state's overall forex sales.

* Spot silver rose 1.2% to $30.36 per ounce, platinum was up 0.9% at $1,001.70 and palladium gained 1.1% to $941.25.

DATA/EVENTS (GMT) 0600 Germany Industrial Orders MM April 0600 Germany Manufacturing O/P Cur Price SA April 0600 Germany Consumer Goods SA April 0830 UK S&P Global PMI: MSC Comp - Output May 1215 EU ECB Refinancing Rate June 1215 EU ECB Deposit Rate June 1230 US International Trade April 1230 US Initial Jobless Clm Weekly.