Gold prices surged more than 2% on Monday (November 10th), hitting a two-week high, as weak U.S. economic data reinforced expectations that the Federal Reserve would cut interest rates, boosting demand for the non-yielding asset.

Spot gold rose 2% to $4,079.71 an ounce at 9:45 a.m. ET (14:45 GMT), after hitting its highest level since October 27 earlier in the session. U.S. gold futures for December delivery rose 2% to $4,090.80 an ounce.

The dollar index (.DXY) weakened, making gold more affordable for foreign buyers. "Some of the weak data last week made the market a little more dovish in their expectations for the Fed... we could still see a rate cut in December," said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Data last week showed the US economy lost jobs in October, with losses in the government and retail sectors. Furthermore, US consumer sentiment declined in early November as households worried about the economic impact, data released on Friday showed.

The market now sees a 67% chance of a rate cut in December, with the chance increasing to around 80% in January, according to the CME Group's FedWatch tool.

Non-yielding gold tends to perform well in low-interest rates and during times of economic uncertainty.

Gold prices could range between $4,200 and $4,300/oz by year-end, with $5,000/oz still a reasonable target for the first quarter of next year, Grant added.

Meanwhile, the US Senate on Sunday advanced a measure aimed at reopening the federal government and ending the 40-day shutdown.

"The reopening of economic activity will restore data flow and revive expectations of a December rate cut, but more importantly, it will shift market focus back to the worsening US fiscal outlook," said Ole Hansen, head of commodity strategy at Saxo Bank, in a note.

Elsewhere, spot silver rose 3.2% to $49.84 an ounce, reaching its highest level since October 21, platinum rose 1.4% to $1,566.08, and palladium rose 1.1% to $1,396.50. (alg)

Source: Reuters.com