PRECIOUS-Gold prices trade above $3,600 on Fed rate-cut bets

Sept 9 (Reuters) - Gold prices hovered near a record high on Tuesday, holding firm above the $3,600 level, as growing expectations for a U.S. Federal Reserve interest rate cut this month lifted demand for the precious metal.

FUNDAMENTALS

Spot gold XAU= was up 0.1% at $3,640.41 per ounce, as of 0103 GMT. Bullion rose to a record high of $3,646.29 on Monday.

U.S. gold futures GCcv1 for December delivery edged 0.1% higher to $3,682.

U.S. job growth weakened sharply in August and the unemployment rate increased to a nearly four-year high of 4.3%, confirming that labor market conditions were softening and sealing the case for a Fed rate cut next week.

Traders are pricing in an 89.4% chance of a 25-basis-point rate cut at the Fed's September meeting and a 10.6% probability of a jumbo 50-basis-point rate cut, according to the CME Group's FedWatch tool.

Lower U.S. interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

The dollar index .DXY fell to an almost seven-week low against its rivals, making gold more attractive for other currency holders, while the benchmark U.S. 10-year yield US10YT=RR dropped to a five-month low. USD/ US/

Meanwhile, the European Central Bank is widely expected to hold rates at its policy meeting on Thursday.

Investors are now awaiting U.S. producer price data on Wednesday and consumer prices on Thursday for further clues on the Fed's policy path.

Gold prices have gained 38% so far this year, following a 27% jump in 2024, bolstered by soft dollar, strong central bank accumulation, dovish monetary settings and heightened global uncertainty.

SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.23% to 979.68 tons on Monday from 981.97 tons on Friday. GOL/ETF

Elsewhere, spot silver XAG= was flat at $41.31 per ounce. Platinum XPT= gained 0.3% to $1,387.20 and palladium XPD= climbed 0.8% to $1,142.64.

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