Gold rose more than 2% on Thursday as traders scaled back September rate hike expectations after Federal Reserve Governor Christopher Waller said he would support leaving interest rates unchanged if data continues to show inflation pressures moderating.
Spot gold rose 2.3% to $4,488.54 per ounce by 02:04 p.m. ET(1804 GMT), after touching its highest since August 28 earlier in the session.
U.S. gold futures settled 2.8% higher at $4539.9.
Christopher Waller said on Thursday that if upcoming data confirms inflation pressures are cooling, he would be inclined to argue in favor of keeping interest rates steady at the U.S. central bank's next policy meeting.
Traders now see about a 54% chance of a rate hike when policymakers meet on September 15 to 16, down from about 62% before Waller's comments. [FEDWATCH]
"I think traders at the moment are looking at the Fed being less aggressive with rates," said Bob Haberkorn, senior market strategist at StoneX.
"More and more traders are coming around to the idea that (the Fed) could do one rate hike, but there probably isn't much more they can do with rates after that."
Lower Treasury yields added support to bullion by reducing the opportunity cost of holding non-yielding gold. The U.S. dollar also fell, making greenback-priced bullion more affordable for overseas buyers.
On Wednesday, golf slipped to its lowest level since August 7 before settling more than 1% higher as the U.S. dollar index retreated from a nearly three-week peak, while Treasury yields eased from multi-year highs. [USD/] [US/]
Although gold is typically seen as an inflation hedge, higher interest rates tend to diminish the non-yielding metal's appeal.
Investors now await the closely watched U.S. non-farm payrolls report due on Friday, followed by the August CPI and PPI inflation reports next week.
Meanwhile, oil prices headed for a fourth day of gains as U.S. strikes on Iran and renewed Israeli threats against Tehran revived concerns about disruptions to Middle East supplies. [O/R]
Spot silver gained 2.8% to $67.13, platinum rose 4.2% to $1,830.28, and palladium climbed 5.9% to $1,426.75.
