Investing.com - Gold prices extended gains from Europe's session in North American trade on Tuesday, touching a more than one-week high amid reduced expectations that the Federal Reserve will raise interest rates at its policy meeting later this month.
Gold for December delivery on the Comex division of the New York Mercantile Exchange rose to a session high of $1,339.10 a troy ounce, the most since August 26. It was last at $1,338.65 by 8:42AM ET (12:42GMT), up $11.95, or 0.9%. There was no settlement on Monday due to the U.S. Labor Day holiday.
According to Investing.com's Fed Rate Monitor Tool, investors are pricing in a 27% chance of a rate hike at the Fed's September 20-21 meeting in wake of last week's disappointing U.S. employment data.
Investors returning from the long Labor Day weekend looked ahead to fresh economic data for more hints on the timing of a U.S. rate hike.
The U.S. Institute of Supply Management is to release data on August service sector activity at 10:00AM ET (14:00GMT) on Tuesday. The gauge is expected to inch down 0.5 points to 55.0. Anything above 50.0 signals expansion.
The data takes on extra importance after the ISM manufacturing survey published last week showed a shocking contraction in activity.
While expectations for a near-term rate hike have been scaled back, investors still believe the Fed will hike rates at least once before the end of the year, most likely in December.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 95.65 early Tuesday, managing to stay above a one-week low of 95.18 set on Friday just after the U.S. payrolls data.