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Market sees over 86% chance of September rate cut

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U.S. GDP estimates on Thursday; PCE due on Friday

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Palladium hits 7-week low

(Updates for US morning hours)

By Sarah Qureshi

Aug 26 (Reuters) -

Gold prices rose on Tuesday, lifted by safe-haven demand as

investor confidence in the U.S. central bank wavered following

President Donald Trump's dismissal of a Fed governor.

Spot gold gained 0.2% to $3,372.05 an ounce at 1018

a.m. ET (14:18 GMT), having hit its highest since August 11 at

$3,386.27 earlier in the session.

U.S. gold futures for December delivery were up 0.1%

at $3,420.40.

"Overnight you had the news that Trump fired one of the Fed

governors accused of mortgage fraud. It gave a little life to

gold because the Fed's kind of been the driver in gold right

now," said RJO Futures market strategist Bob Haberkorn.

U.S. President Donald Trump said he was firing Federal

Reserve Governor Lisa Cook over alleged improprieties in

obtaining mortgage loans, an unprecedented step that could test

the boundaries of presidential power over the independent

monetary policy body should it be challenged in court.

Last week, Federal Reserve Chair Jerome Powell signaled a

possible interest rate cut at the U.S. central bank's meeting

next month, saying that risks to the job market were rising.

Markets are currently pricing in over 86% probability of the

U.S. central bank implementing a quarter-point rate cut in

September, according to the CME FedWatch tool.

"If Powell alludes to a dovish tone on rates at the next

meeting and moving forward at another cut for this year, gold

should continue higher," Haberkorn added.

Data showed that the U.S. July durable goods orders data

showed a decline of 2.8%, compared with a 4% expected decrease

and a decline of 9.4% in June. Investors now await the U.S. GDP

data on Thursday and the Personal Consumption Expenditures (PCE)

on Friday.

Non-yielding gold tends to gain appeal in a

low-interest-rate environment and its safe haven appeal

increases during economic uncertainty.

Spot silver fell 0.2% to $38.49 an ounce.

Platinum added 0.2% to $1,345.05. Palladium

rose 0.6% to $1,345.05 after reaching its lowest level since

July 9 earlier in the session.