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US weekly jobless claims fall

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August PCE data to show 0.3% m/m rise, per Reuters poll

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Palladium gains over 2%

(Updates for U.S. morning hours)

By Sherin Elizabeth Varghese

Sept 25 (Reuters) - Gold pared gains on Thursday after

U.S. weekly jobless claims unexpectedly declined, while

investors awaited key inflation data that could shape the

Federal Reserve's next interest rate moves.

Spot gold was up 0.1% at $3,741.88 per ounce, as of

09:33 a.m. ET (1333 GMT) after rising as much as 0.5% earlier in

the session. Prices hit a record high of $3,790.82 on Tuesday.

U.S. gold futures for December delivery rose 0.1% to

$3,771.60.

The number of Americans filing new applications for

unemployment benefits fell last week, but the labor market has

lost its luster amid an anemic pace of hiring. Meanwhile, the

U.S. economy grew faster than previously thought in the second

quarter.

"Jobless claims came in at 218,000 versus expectations of

235,000, a slightly hawkish print that may temper some

(rate)easing expectations, but it's not enough to alter the

overall trend," said Peter Grant, vice president and senior

metals strategist at Zaner Metals.

"The biggest short-term risk for gold is a

hotter-than-expected PCE reading. If inflation surprises on the

upside, it could boost the dollar and weigh on gold

temporarily."

Friday's personal consumption expenditures (PCE) price

index, the Fed's preferred inflation measure, is expected to

show a 0.3% month-on-month increase for August and a 2.7%

year-on-year rise, as per a Reuters poll.

Markets currently see an 81% probability of a Fed rate cut

in October, down from 90% before the release of the jobs data,

according to the CME FedWatch tool.

San Francisco Fed Bank President Mary Daly reiterated her

"full support" for last week's 25-basis-point rate cut and

signaled openness to additional reductions. In contrast, Fed

Chair Jerome Powell maintained a more cautious stance on

Tuesday.

Safe-haven bullion tends to thrive in a low-interest rate

environment.

Among other metals, spot silver rose 1.6% to $44.58

per ounce, platinum gained 1.8% to $1,499.45 and

palladium rose 2.5% to $1,240.21.