Investing.com - Gold prices held near a more than one-week high during European hours on Tuesday, as investors awaited fresh signals about the timing of a possible U.S. interest rate increase this year.
The U.S. Institute of Supply Management is to release data on August service sector activity at 10:00AM ET (14:00GMT) on Tuesday. The gauge is expected to inch down 0.5 points to 55.0. Anything above 50.0 signals expansion.
The data takes on extra importance after the ISM manufacturing survey published last week showed a shocking contraction in activity.
Gold for December delivery on the Comex division of the New York Mercantile Exchange tacked on $5.75, or 0.43%, to trade at $1,332.55 a troy ounce by 3:14AM ET (07:14GMT). The yellow metal did not settle on Monday due to the U.S. Labor Day holiday.
On Friday, prices rallied to a one-week peak of $1,334.00 as disappointing U.S. employment data diminished the likelihood that the Federal Reserve will raise interest rates at its policy meeting later this month.
According to Investing.com's Fed Rate Monitor Tool, investors are pricing in a 27% chance of a rate hike at the Fed's September 20-21 meeting.
While expectations for a near-term rate hike have been scaled back, investors still believe the Fed will hike rates at least once before the end of the year, most likely in December.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 95.65 early Tuesday, managing to stay above a one-week low of 95.18 set on Friday just after the U.S. payrolls data.