Gold prices edged higher in Asian trading on Monday as the U.S. dollar hovered near a five-week low, supported by firm expectations that the Federal Reserve will cut interest rates this week.

A run of softer economic data and Friday’s inflation figures strengthened market conviction that the central bank is preparing to loosen policy, though investor caution kept bullion gains modest.

Spot gold was last up 0.3% at $4,208.55 an ounce by 03:28 ET (08:28 GMT). U.S. Gold Futures for February slipped 0.3% to $4,2371.10.

Gold supported by Fed easing bets, but caution remains

Gold rose as a weaker dollar made the metal more attractive for overseas buyers.

The dollar’s retreat has been driven largely by rising confidence that the Fed will deliver a quarter-point cut at its upcoming Dec. 9–10 meeting, with traders pricing in the move after several indicators pointed to easing inflationary pressures.

Recent economic releases -- including a soft private-sector payroll report and slowing labour-market momentum -- have reinforced expectations of policy easing.

Meanwhile, the delayed U.S. core Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, showed only a mild monthly rise and an annual rate continuing to drift lower.

Lower interest rates reduce the opportunity cost of holding bullion, while a subdued dollar can further enhance demand by making gold cheaper in global markets.

However, gains remained limited as investors stayed cautious. U.S. Treasury yields have edged higher in recent sessions, offsetting some of the support from a softer dollar.

Market participants also point to mixed signals from Fed policymakers in recent weeks, with some officials warning against premature easing. The divide has injected uncertainty into the policy outlook, raising the risk of an unexpected stance from the central bank.

Traders now await the Fed’s decision and Chair Jerome Powell’s press conference for confirmation that easing is underway.

Metal markets subdued

Other precious and industrial metals traded in tight ranges on Monday amid a broader cautious mood.

Silver Futures fell 0.6% to $58.708 per ounce, while Platinum Futures fell 0.3% to $1,663.60/oz.

Benchmark Copper Futures on the London Metal Exchange edged up 0.3% to $11,681.20 a ton, while U.S. Copper Futures declined 0.7% to $4.67 a pound.