PRECIOUS-Markets eye Fed rate cut as gold stays near all-time high

By Sherin Elizabeth Varghese and Sarah Qureshi

Sept 12 (Reuters) - Gold prices rose on Friday, holding close to record highs hit earlier this week, as signs of a weakening U.S. labor market reinforced expectations the Federal Reserve will deliver its first rate cut of the year next week.

Spot gold XAU= was up 0.4% at $3,647.55 per ounce, as of 11:00 a.m. EDT (1500 GMT), close to Tuesday's all-time high of $3,673.95. The metal has gained 1.7% so far this week and is poised for a fourth consecutive weekly advance.

U.S. gold futures GCcv1 for December delivery were up 0.3% at $3,685.60.

"Weaker employment and spotty inflation... priced in with the Fed having to cut rates is pushing metals higher because there is the risk of longer-term inflation," said Daniel Pavilonis, senior market strategist at RJO Futures.

Recent data showing a jump in jobless claims, alongside soft nonfarm payrolls and revisions that cut 911,000 jobs from the past year, point to cooling momentum in the economy.

At the same time, consumer prices posted their sharpest monthly gain in seven months in August, but investors are giving more weight to labor market weakness than to sticky inflation in shaping rate expectations.

Fed fund futures fully price in a 25-basis-point cut at the Sept. 17 meeting, with bets on a larger 50-bps move easing. The decision comes as President Trump pushes for rate cuts and reportedly seeks to influence the Fed, including an attempt to oust Governor Lisa Cook. FEDWATCH

"Given these tailwinds and following the recent step higher in exchange-traded fund flows (ETFs), we now look for gold to rise to $3,900/oz by mid next year," said UBS analyst Giovanni Staunovo. GOL/ETF

The yellow metal has risen 39% so far this year and is often seen as thriving in lower-rate settings, valued by investors as a hedge against inflation and broader uncertainty.

Meanwhile, China's central bank on Friday sought public feedback on plans to simplify gold import and export rules by streamlining licensing.

Elsewhere, spot silver XAG= rose 1.5% to $42.20 per ounce, at a 14-year high, platinum XPT= was up 1.2% at $1,394.74 and palladium XPD= gained 1.6% to $1,207.25. All three metals were set for weekly gains.

      
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