Investing.com - Gold prices rose sharply in European trade on Wednesday, extending gains from the prior session as investors reevaluated the likelihood that the Federal Reserve will raise interest rates this year.
Gold for December delivery on the Comex division of the New York Mercantile Exchange touched an intraday peak of $1,361.50 a troy ounce. It was last at $1,360.25 by 06:58GMT, or 2:58AM ET, up $13.55, or 1.01%.
A day earlier, gold tacked on $5.40, or 0.4%, after disappointing U.S. economic data prompted market players to push back expectations for the next U.S. rate hike, weighing on the dollar.
The Labor Department said nonfarm business sector labor productivity fell 0.5% in the second quarter, extending the longest decline since 1979.
The downbeat data lessened the threat of an early interest rate rise from the Federal Reserve.
Fed funds futures prices showed traders now see a 40% chance of a U.S. rate hike by December, according to CME Group's (NASDAQ:CME) Fed Watch tool. That compares with around 50% ahead of the report. September odds were at around 15% early on Wednesday, down from 20% a day earlier.
Gold is sensitive to moves in U.S. rates. 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, fell to 95.80 in early trade, moving away from levels near 96.50 just a few days ago.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
The yellow metal flirted with a more than two-year high above the $1,370-level less than a week ago before coming under pressure as last week's robust U.S. employment report revived speculation of a U.S. interest rate hike in the coming months.
Gold is up nearly 26% on the year so far, boosted by concerns over global growth and expectations of monetary stimulus.
Also on the Comex, silver futures for September delivery surged 45.0 cents, or 2.27%, to trade at $20.30 a troy ounce during morning hours in London, while copper futures gained 1.4 cents, or 0.65%, to $2.164 a pound.