Gold soars 2% as Fed rate hike slowdown prospects hit dollar

  • Gold highest since early August, futures surge over 3%
  • Silver climbs more than 2% to highest since May
  • Dollar drops to near four-month low
  • Focus on U.S. non-farm payrolls data due on Friday

Dec 1 (Reuters) - Gold prices rose 2% on Thursday to climb above the key $1,800 per ounce pivot, as the dollar weakened on the prospect of slower rate hikes from the Federal Reserve and signs of cooling U.S. inflation.

Spot gold climbed 1.8% to $1,800.69 per ounce by 1:55 p.m. ET (1855 GMT), reaching $1,803.94 earlier in the session to its highest since August 10.

U.S. gold futures settled up 3.1% at $1,815.2.

"We've established a price uptrend on the daily chart which invited technical-based buying... we're seeing the dovish lean by (Fed Chair Jerome Powell) supporting the commodity markets and seen the U.S. dollar index back off," said Jim Wyckoff, senior analyst at Kitco Metals.

Powell on Wednesday said it was time to slow the pace of interest rate hikes, but added that controlling inflation "will require holding policy at a restrictive level for some time".

The dollar fell more than 1% to a near four-month low against rival currencies, making gold less expensive for overseas buyers.

Traders are pricing in a 91% probability that the Fed increases rates by 50 basis points on Dec. 14.

Further supporting bets around slower rate hikes, data showed moderation in the inflation trend last month, boosting interest in gold, analysts said.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion.

On the technical front, gold is trading above its 50-day, 100-day and 200-day moving averages, which is considered a bullish signal by traders.

"With the Fed on pause, decreasing U.S. real yields drive our bullish baseline outlook for gold and silver prices over the back half of next year," analysts at JP Morgan said in a note.

Focus now turns to the U.S. Labor Department's non-farm payrolls (NFP) data due on Friday.

Elsewhere, spot silver rose 2.3% to $22.70 per ounce, and hit its highest since early May. Platinum was up 0.5% to $1,038.24 while palladium gained 3.2% to $1,941.65.

Reporting by Seher Dareen in Bengaluru; Editing by Shailesh Kuber and Alexander Smith

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