Gold prices edge higher on prospect of steeper US rate cuts

Gold prices inch higher on Monday, supported by a weaker dollar and on the prospect of a more aggressive rate reduction by the U.S. Federal Reserve at its upcoming policy meeting.

FUNDAMENTALS

* Spot gold was up 0.2% at $2,580.81 per ounce, as of 0020 GMT. Bullion rose to a record high of $2,585.99 on Friday.


* U.S. gold futures edged 0.1% lower to $2,608.60.

* The dollar weakened 0.1%, making gold less expensive for other currency holders.

* All eyes will be on the Federal Reserve this week as speculation mounts over the extent of interest rate cuts and the pace of future reductions at its monetary policy meeting.

* Markets are currently pricing in an 52% probability of a 50-bp easing at the conclusion of a two-day meeting on Wednesday, up from 43% on Friday, while there are a 48% chance of a 25-bps cut, according to the CME FedWatch tool showed.

* Lower rates reduce the opportunity cost of holding a zero-yield bullion.

* Data on Friday showed that U.S. consumer sentiment rose to 69.0 in September from 67.9 in August, reflecting improved sentiment amid easing inflation, though caution remains ahead of the November election.

* Gold market bulls are locking in bullion prices surging to records high, with a milestone of $3,000 per ounce coming into focus, fired up by monetary easing by major central banks and a tight U.S. presidential election race.

* SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.03% to 870.51 tons on Friday.

* Spot silver gained 0.8% to $30.89 per ounce, platinum fell 0.2% to $993.40 and palladium shed 0.3% to $1,065.78.

DATA/EVENTS (GMT) 0200 China Urban Investment (YTD) YY Aug 0200 China Retail Sales YY Aug 0200 China Unemp Rate Urban Area Aug 0900 EU Total Trade Balance SA July 1000 EU Reserve Assets Total Aug

UK House Price Rightmove MM Sept

UK House Price Rightmove YY Sept