Gold marches towards record highs as Jerome Powell endorses rate cuts

India's gold demand during the upcoming festive season is likely to remain robust as a substantial reduction in import duty has made prices appealing

Gold held near record highs on Monday, buoyed by a softer dollar and dovish remarks from U.S. Federal Reserve Chair Jerome Powell bolstering expectations of a September interest rate cut.

Spot gold was up 0.6% to $2,524.30 per ounce at 0940 GMT, about $7 shy of the record high of $2,531.60 hit last week. U.S. gold futures also gained 0.6% to $2,560.40.

The dollar hit its lowest in more than a year, making gold less expensive for other currency holders, while benchmark 10-year Treasury yields also eased. [USD/] [US/]

Powell strongly signalled the potential for U.S. rate cuts, indicating that upcoming economic data would determine their pace and scale, which could boost gold investment demand, UBS analyst Giovanni Staunovo said.

Powell on Friday endorsed an imminent start to rate cuts, saying further cooling in the job market would be unwelcome.

Traders have fully priced in a cut for next month, with a 64% chance of a 25 basis point (bp) reduction and a 36% chance of a 50 bp cut, according to the CME FedWatch tool.

A low interest rate environment tends to boost non-yielding bullion's appeal.

Staunovo added demand for gold from central banks could also support prices.

"Central banks purchases are linked to a mandate to buy a specific amount of gold over a specific time frame ... fears of sanctions, geopolitics, ballooning debts, are likely to keep demand from central banks supported despite record high prices, in my view," he said.

India's gold demand during the upcoming festive season is likely to remain robust as a substantial reduction in import duty has made prices appealing, industry officials said.

Spot silver rose 1% to $30.1.

"Sluggishness in global industrial production has capped (the) upside for silver, while it has not benefited from the geopolitical risk premium aiding gold," analysts at Heraeus said in a note.

"However, with interest rate cuts now firmly on the horizon, silver could begin to rise with gold."

Platinum gained 1% to $972.45 and palladium eased 0.3% to $959.75.