Gold climbs as more weak US data boosts Fed rate-pause bets

(Reuters) – Gold hit its highest in nearly a month on Wednesday, as a fresh batch of weak U.S. economic readings reinforced the view that the Federal Reserve may have to hit pause on its interest rate hikes.

Spot gold rose 0.4% to $1,943.92 per ounce by 2:20 p.m. EDT (1820 GMT), after hitting its highest since Aug. 2 earlier in the session. U.S. gold futures settled 0.4% higher to $1,973.00.

“Gold is trading at highs for the month as the weaker-than-expected ADP report and GDP revision continue a trend of softer economic indicators that will likely keep the Fed on hold in September,” said Tai Wong, a New York-based independent metals trader.

Benchmark 10-year yields dropped to their lowest since Aug. 11 while the dollar slipped to a two-week low after U.S. GDP data showed a softening of the economy in the second quarter. A drop in U.S. job openings added to the sentiment.

Dollar-priced bullion, which bears no interest, finds support when yields fall.

Bets on the Fed leaving rates unchanged in September rose to nearly 91%, from 88.5% before the data, while bets of a pause in November rose to nearly 59% from 52% a day earlier, according to the CME Group’s FedWatch tool.

Investors now await the PCE price index on Thursday and the nonfarm payrolls (NFP) report on Friday.

“The smart rally in the past week suggests traders were a little short. The market will consolidate ahead of key inflation and payrolls data; a move back above 1980 is needed to awaken bulls’ animal spirits,” added Wong.

“Bad news for the economy will be good news for gold,” said ActivTrades senior analyst Ricardo Evangelista in a note.

Silver fell 0.4% to $24.63 per ounce, but was still hovering close to a one-month high.

Platinum was steady at $976.05, near its highest level since July 19. Palladium shed 2.1% to $1,223.33.