Gold prices edged lower on Monday as the dollar crept higher, while increased U.S. interest rate cut expectations following a dovish pivot from Federal Reserve Chair Jerome Powell lent support to bullion.

Spot gold was down 0.2% at $3,364.25 per ounce, as of 0109 GMT, after hitting its highest since August 11 on Friday. U.S. gold futures for December delivery eased 0.3% to $3,409.80.

The U.S. dollar index rose 0.2% against its rivals after dropping to a four-week low, making gold less attractive to overseas buyers.

Powell on Friday signaled a possible interest rate cut at the U.S. central bank’s meeting next month, saying that risks to the job market were rising but also noting inflation remained a threat and that a decision wasn’t set in stone.

Markets are now pricing in an 87% chance of a quarter-point rate cut at the September 17 policy meeting, and a cumulative 48 basis points of reductions by this year-end, according to CME FedWatch Tool.

Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

Asian share markets rallied on Monday as investors celebrated the likely resumption of interest rate cuts in the U.S.

Investors now await a reading on U.S. personal consumption prices on Friday that is expected to show core inflation creeping up to its highest since late 2023 at 2.9%.

Physical gold demand in key Asian hubs remained subdued last week as price volatility kept buyers at bay, while jewellers in India resumed purchases ahead of a key festival season. [GOL/AS]

Elsewhere, spot silver was down 0.2% at $38.09 per ounce, platinum fell 0.3% to $1,356.95 and palladium slipped 0.6% to $1,119.67.