Gold set for best month in four as rate-hike cycle nears end

The dollar index, meanwhile, was heading for its second straight monthly decline, making gold more attractive for other currency holders.

Gold prices rose on Monday, putting them on track for their best month in four as an overall weaker dollar and expectations that major global central banks are nearing a peak with interest rate hikes boosted investor sentiment.

Spot gold gained 0.6% to $1,971.27 per ounce by 09:59 a.m. EDT (1359 GMT). Bullion is up 2.5% so far this month.

U.S. gold futures climbed 0.5% to $1,971.10.

The dollar index, meanwhile, was heading for its second straight monthly decline, making gold more attractive for other currency holders.

Recent data showing signs of cooling inflation in the United States has raised expectations that the Federal Reserve was closer to ending its fastest rate hiking cycle since the 1980s.

According to the CME’s FedWatch Tool, the probability that the Fed will leave rates unchanged this year is at 60%.

"I don’t think the Fed’s going to make a move in September, but later in the year, if we continue to get strong economic data, the Fed probably will make one more rate-hike,” said Jim Wyckoff, senior market analyst at Kitco.

"Right now, the gold and silver markets are waiting for the next catalyst… if demand from China starts to recover, we see more upside in gold and silver.”

Two European Central Bank policymakers on Friday also raised the prospect of an end to its steepest and longest string of rate rises.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

"Markets feel vindicated with their assessment that Fed rates are at or near their terminal rate, with key inflation reports from the U.S. all pointing towards a faster pace of disinflation,” said Matt Simpson, senior analyst at City Index.

Elsewhere, silver rose 1.8% to $24.77 per ounce. Platinum gained 2.1% to $955.08 and palladium climbed 2.3% to $1,274.62. All three were set for monthly gains.