Gold prices inch higher on Fed rate optimism with US data due in December

Gold prices edged higher on Tuesday, as recovering expectations of a U.S. rate cut in December weighed on the dollar and Treasury yields ahead of economic data that could offer further signals on the Federal Reserve's policy trajectory.

Spot gold rose 0.3 per cent to $2,646.03 per ounce, as of 0921 GMT, after falling as much as 1 per cent on Monday. U.S. gold futures gained 0.4 per cent to $2,668.90. 

"Several factors are influencing gold's price action, including expectations of a Fed rate cut in December, the 10-year Treasury yield hovering near its lowest level since October, and sustained safe-haven demand," said Ricardo Evangelista, senior analyst at ActivTrades.

Markets are pricing in a 72 per cent probability of a 25-basis-point rate cut at the Dec. 17-18 meeting, up from 66 per cent before Fed Governor Christopher Waller on Monday signalled support for a cut this month, citing inflation still forecast to fall to 2 per cent.

UBS said it expects the Fed to cut by 25 basis points in December, followed by another 100 bps of easing through 2025.

The benchmark 10-year Treasury yield ticked up but was hovering around a 1-month low, making non-yielding bullion more attractive. The dollar was down 0.3 per cent.[US/]

Investors will also be watching job openings data due at 1500 GMT, the ADP employment report on Wednesday, and Friday's payrolls report.

Gold, which does not pay any interest, historically performs well in low-interest rate environments and during periods of geopolitical uncertainty.

"I anticipate gold prices to trade within a relatively narrow range, with resistance at $2,650 and support at $2,620," Evangelista added.

In other metals, spot silver added 1.6 per cent to $30.97 per ounce, platinum rose 0.9 per cent to $955.35 and palladium was up 1.1 per cent to $991.75.