PRECIOUS-Gold falls as investors dial back rate cut bets, set for third monthly gain

By Ishaan Arora

Oct 31 (Reuters) - Gold retreated towards $4,000 an ounce on Friday as uncertainty over another U.S. rate cut in December helped keep the dollar near three-month highs, but held on track for its third straight monthly gain.

Spot gold XAU= was down 0.5% at $4,004.37 per ounce by 0936 GMT, having gained nearly 4% so far this month. U.S. gold futures GCcv1 for December delivery were steady at $4,016.30 per ounce.

The dollar index .DXY held near its highest in three months against rivals, making greenback-priced bullion more expensive for other currency holders. USD/

"Gold is under pressure as the dollar has been strengthening on the back of those hawkish remarks (by Fed Chair Powell)," said ActivTrades analyst Ricardo Evangelista. Markets had been taking another rate cut in December for granted, he said.

On Wednesday, the Fed cut interest rates by 25 basis points for the second time this year, taking the benchmark overnight rate to a target range of 3.75%–4.00%.

Markets now price in a 67% probability of a 25-bp cut compared with a 91.1% chance a week ago, CME Group's FedWatch tool showed, after Chair Jerome Powell's hawkish remarks.

Safe-haven demand has also been dented on trade-related optimism following trade talks between the U.S. and China this week.

On Thursday U.S. President Donald Trump said he had agreed to trim tariffs on China in exchange for Beijing cracking down on illicit fentanyl trade, resuming U.S. soybean purchases and keeping rare earths exports flowing.

The macro background remains supportive of gold in the medium to long term, with ongoing geopolitical turbulence in Ukraine and the Middle East, and between the U.S. and China, Evangelista added.

Elsewhere, spot silver XAG= fell 0.2% to $48.82 per ounce, platinum XPT= lost 1.5% to $1,586.64, and palladium XPD= was down 0.4% at $1,438.72.

Reuters Terminal users can see related news and prices by clicking on the codes in brackets:
All precious metals headlines           GOL
Precious metals market reports          GOL/
European gold prices                    GOLD/EU1GOLD/EU20#PREC
London Bullion Market Association       LBMA01
New York Comex gold 0#GC: and silver  0#SI:
New York platinum 0#PL: and palladium 0#PA: