Gold prices fall over 1% as employment data lowers expectations of rate cut

Gold prices fell over 1 per cent on Tuesday and were on track for their biggest drop on a percentage basis in 1-1/2 months as recent US employment data lowered expectations for a bigger rate cut, while markets awaited minutes of the US Federal Reserve's latest policy meeting for fresh signals.

Spot gold fell 1.1 per cent to $2,615.50 per ounce by 12:19 p.m. ET (1619 GMT), falling for the fifth-straight session and moving further from the Sept. 26 record peak of $2,685.42.

US gold futures lost 1.2 per cent to $2,634.60.

"Last couple of days saw retracement or a pullback due to the change in outlook in regards to interest rates," said David Meger, director of metals trading at High Ridge Futures, adding that bond yields have rallied and the idea of further extensive rate cuts has been muted. [USD/] [US/]

According to the CME FedWatch tool, markets priced out a 50-basis-point reduction at the Fed's November meeting after last week's strong jobs report. They now see an 87 per cent chance for a 25-bps cut.

Markets are focused on the minutes of the Fed's latest policy meeting, due on Wednesday, followed by US Consumer Price Index data on Thursday and Producer Price Index data on Friday.

"US inflation data to be released on Thursday is likely to show further decline in price pressure, but is unlikely to trigger renewed speculation of stronger Fed rate cuts. Therefore, higher gold prices are likely to be primarily driven by geopolitical risks," Commerzbank said in a note.

Gold is reputed for its stability as a favoured hedge against geopolitical and economic risks.

Global physically backed gold exchange-traded funds registered a fifth consecutive month of inflows in September as North America-listed funds added to their holdings, the World Gold Council said on Tuesday.[GOL/ETF]

Spot silver lost 4.2 per cent to $30.39 per ounce. Platinum was down 1.7 per cent at $955.55 and palladium fell 1.7 per cent to $1,006.61.