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Fed policymakers signal rate cuts ahead, but not recession

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Palladium dropped to multi-year low on Monday

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US service sector rebounds in July

(Updates prices and graphic)

By Daksh Grover and Ashitha Shivaprasad

Aug 6 (Reuters) - Gold prices inched lower on Tuesday,

pressured by a stronger dollar, while comments from Federal

Reserve officials reinforcing expectations of bigger U.S.

interest rate cuts later this year limited downward pressure.

Spot gold was down 0.2% to $2,403.22 per ounce as

of 0644 GMT. Bullion fell to its lowest since July 26 in the

previous session

, caught in a global

sell-off

driven by fears of a U.S. recession.

U.S. gold futures edged 0.02% lower to

$2,443.80.

The U.S. dollar rose about 0.3% against its rivals,

while the benchmark 10-year Treasury yields also

rose, putting pressure on the bullion.

"If upcoming economic data out of the U.S. comes out

significantly weaker and the Fed becomes even more dovish, gold

will move towards the $2,500 or beyond that," said ANZ commodity

strategist Soni Kumari.

Traders will also be looking at data from top consumer China

and with geopolitical tensions still running in the background,

safe-haven demand should continue, she added.

U.S. central bank policymakers pushed back against the

notion that weaker-than-expected July jobs data means the

economy is in a recessionary freefall, but also warned that the

Fed will need to cut rates to avoid such an outcome.

Traders are now anticipating 110 basis points (bps) of

easing this year from the Fed, with a 50 bps cut in September

priced in at a more than 70% chance.

Lower rates put pressure on the dollar and bond yields,

while increasing the appeal of non-yielding bullion.

Meanwhile, Japanese stocks opened higher, underpinning a

recovery across battered Asian share markets and even triggering

circuit breakers in some.

Data on Monday showed that the U.S. services sector activity

rebounded from a four-year low in July amid a rise in orders and

employment.

Spot silver fell 1.5% to $26.87 per ounce.

Platinum was up 1.2% to $917.40, while palladium

declined by 0.32% to $846.98 after hitting its lowest

levels since August 2018 on Monday.