Gold prices eased on Monday, but hovered around historic $2,500 level, as traders locked in profits following bullion's climb to an all-time peak in the previous session on expectations of a U.S. interest rate cut next month.
Spot gold was down 0.2% at $2,503.10 per ounce, as of 0724 GMT, and U.S. gold futures edged 0.2% higher to $2,541.50.
Enthusiasm over a likely interest rate cut by the U.S. Federal Reserve in September propelled bullion to an all-time high of $2,509.65 on Friday. This coupled with increased geopolitical tensions and robust central bank-buying have sent bullion over 20% higher so far this year.
"Gold has been chasing the psychological $2,500 level for several months, and now that it has been reached, we are seeing some natural profit-taking occur," said Tim Waterer, chief market analyst, KCM Trade.
Last week, strong U.S. retail sales print and lower-than-expected unemployment claims, along with mild inflation data, restored confidence in the world's largest economy.
Traders are confident that the U.S. Fed will cut rates next month and the focus is now on the size of the reduction. They are pricing in a 75.5% chance of a 25-basis-point cut, according to CME FedWatch tool.
"Traders will be looking towards Jerome Powell's tone and language at Jackson Hole (on Friday) to fill in some of the blanks in this regard," Waterer added.
The market will also look out for minutes of the Fed's July policy meeting on Wednesday for further cues.
A slowing U.S. economy, upcoming rate cuts, lower yields, a weaker dollar, persistent geopolitical risks, and strong central bank demand will drive gold to the upside in the long term, said Kyle Rodda, a financial market analyst at Capital.com.
Several Chinese banks have been given new gold import quotas from the central bank, anticipating revived demand despite record high prices.
Elsewhere, spot silver rose 0.4% to $29.11 per ounce, platinum was nearly flat at $954.65 and palladium shed 0.7% to $944.43.
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