Gold gains as Fed rate hike bets fade but dollar limits upside

Gold prices rose on Monday as investor expectations of a Federal Reserve rate hike in October diminished, boosting the appeal of the non-yielding asset. Spot gold climbed 0.6% to $4,165.49 an ounce, while U.S. gold futures for December delivery increased 0.8% to $4,194.60. Analysts noted that rising government debt levels are a long-term positive factor for gold, despite headwinds from higher interest rates and a stronger U.S. dollar.

The likelihood of a Fed rate hike in October dropped sharply after recent U.S. job growth data came in weaker than expected, with nonfarm payrolls figures for the prior two months also revised downward. However, traders still see a 69% chance of a rate increase in December, according to the CME FedWatch tool. The stronger U.S. dollar index, which rose 0.22%, made dollar-denominated metals more expensive for foreign investors.

On the geopolitical front, Yemen's Saudi-backed government announced a major military campaign to recapture areas controlled by Iran-backed Houthis. Meanwhile, other precious metals saw gains, with spot silver jumping 2.2% to $61.7252 per ounce, platinum rising 2.1% to $1,733.50, and palladium adding 1.3% to $1,182.50.