Gold prices edge higher as softer dollar lifts appeal

Gold prices edged higher on Tuesday, supported by a pullback in the dollar after an official U.S. report citing consumers expect lower inflation cemented bets for interest rate cuts from the Federal Reserve.

FUNDAMENTALS

* Spot gold was up 0.2% at $2,032.39 per ounce, as of 0157 GMT, after hitting a three-week low on Monday.


* U.S. gold futures also rose 0.2% to $2,038.30 per ounce.

* A New York Federal Reserve report on Monday said consumers expect lower inflation as well as weaker income and spending over the next several years.

* Fed Governor Michelle Bowman retreated from her persistently hawkish view, saying she now sees U.S. monetary policy as "sufficiently restrictive" and signalled her willingness to support eventual interest-rate cuts as inflation eases.

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

* The dollar index weakened 0.1%, making bullion more attractive for other currency holders.

* Earlier this month, a stronger-than-expected jobs data paired with the latest Fed minutes that noted an uncertainty over timings of rate cuts, tempered some sentiments for an early interest rate cut in the U.S..

* Market participants are pricing in an about 62% chance of a rate cut by the U.S. central bank in March, down from a nearly 90% probability seen before the New Year, according to the CME FedWatch tool.

* Investors now await Thursday's U.S. consumer price inflation report for further clarity on the scale and depth of Fed's rate cut.

* Asia's stock indexes were mostly higher on Tuesday after a tech-led surge on Wall Street.

* Meanwhile, core inflation in Japan's capital slowed for the second straight month in December, taking some pressure off the central bank to rush into exiting ultra-loose monetary policy.

* Spot silver rose 0.1% to $23.11 per ounce, while platinum climbed 0.5% to $950.08, and palladium gained 0.5% to $1,002.76.

DATA/EVENTS (GMT) 0700 Germany Industrial Output Nov 1000 Euro Zone Unemployment Rate Nov 1330 US International Trade Nov