Gold's rally extended beyond the $3,600 level for the first time on Monday after weak US employment data reinforced expectations of a Federal Reserve interest rate cut next week.

Spot gold rose 0.9% to $3,617.79 per oz at 12:09 GMT after hitting a record high of $3,622.07 earlier in the session. Bullion prices have surged about 37% so far this year, extending their 27% rally in 2024, driven by a weaker dollar, strong central bank buying, a weak monetary policy environment, and geopolitical and economic uncertainty.

US gold futures for December delivery were unchanged at $3,657.20. US job growth weakened sharply in August, data showed on Friday, and the unemployment rate rose to a nearly four-year high of 4.3%, confirming a weaker labor market and strengthening the case for a Fed rate cut next week.

"(The rate cut bets) are driving gold demand. Furthermore, the overall geopolitical scenario is very uncertain... we have to consider that a significant portion of demand also comes from central bank purchases," said Carlo Alberto De Casa, an external analyst at the Swissquote banking group.

Traders have priced in an 88% chance of a 25 basis point rate cut next week, according to the CME FedWatch tool. Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

"We expect gold to rise to $3,700/oz by the middle of next year," said UBS analyst Giovanni Staunovo. Meanwhile, the yield on the benchmark 10-year US Treasury bond is near a five-month low. Focus now turns to the US Producer Price Index data on Wednesday and the Consumer Price Index on Thursday, which could provide further clarity on the magnitude of the Fed's expected interest rate cut.

Meanwhile, China's central bank added gold to its reserves in August, extending its bullion purchases for the 10th consecutive month, official data showed on Sunday. Elsewhere, spot silver rose 0.6% to $41.22 an ounce. Platinum rose 0.6% to $1,381.61, and palladium gained 1.4% to $1,125.19. (alg)

Source: Reuters