Gold gains as Fed rate-cut optimism dents dollar

Dec 8 (Reuters) - Gold prices edged higher on Monday, as rising expectations of a U.S. Federal Reserve interest rate cut this week pressured the dollar.

FUNDAMENTALS

Spot gold XAU= was up 0.3% at $4,206.99 per ounce, as of 0118 GMT.

U.S. gold futures GCcv1 for December delivery lost 0.2% to $4,236.30 per ounce.

The U.S. dollar .DXY edged lower to hover near six-week lows touched on December 4, making greenback-priced gold cheaper for overseas buyers. US/USD/

U.S. consumer spending increased moderately in September after three straight months of solid gains, suggesting a loss of momentum in the economy at the end of the third quarter as a lacklustre labour market and rising cost of living curbed demand.

This followed private payroll data showing the sharpest decline in more than two-and-a-half years last month.

Dovish commentary from several Fed officials has further fuelled expectations of monetary easing.

CME's FedWatch tool indicates an 88.4% probability of a 25-basis-point rate cut at the Fed's December 9-10 meeting.

Lower interest rates tend to favour non-yielding assets such as gold.

On Thursday, data showed new U.S. unemployment benefit claims dropped to 191,000 for the week ended November 29, the lowest in more than three years and well below economists' estimate of 220,000.

Elsewhere, silver XAG= was steady at $58.25 per ounce, platinum XPT= gained 0.3% to $1,646.56, while palladium XPD= slid 0.5% to $1,455.55.