PRECIOUS-Gold rises as dollar eases, but Fed outlook, trade optimism limit gains

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Traders see 71% chance of US rate cut in Dec - CME FedWatch Tool

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ADP employment data due on Wednesday

(Updates comments, details and prices for Asia session close)

By Ishaan Arora

Nov 3 (Reuters) - Gold prices edged higher on Monday as the dollar held just below three-month highs touched last week, although reduced expectations for further Federal Reserve rate cuts in December and easing U.S.-China trade tensions capped gains.

Spot gold was up 0.3% at $4,014.59 per ounce, as of 0627 GMT. U.S. gold futures for December delivery rose 0.7% to $4,025.10 per ounce.

The U.S. dollar index was down 0.1% against rivals, making greenback-priced bullion cheaper for other currency holders.

"It's more of positioning from the U.S. dollar side, given that dollar strength has started to stabilize in today's Asia session, so that has caused a bit of uptick in gold," OANDA senior market analyst Kelvin Wong said.

The U.S. Fed cut interest rates by 25 basis points on October 29 for the second time this year, but Chair Jerome Powell's hawkish comments afterward cast doubt on the likelihood of further rate cuts in 2025.

Traders now assign a 71% probability to a rate cut in December, down from more than 90% prior to Powell's remarks, according to CME's FedWatch Tool.

Non-yielding gold thrives in a low-interest-rate environment and during economic uncertainties.

Investors have their eyes on other news, including ADP U.S. employment data and ISM PMIs this week, for economic indicators that could alter the Fed's hawkish stance.

"Safe-haven play has been reduced at this point in time, over the de-escalation of U.S.-China trade tensions. It could also be a rotation towards a much more risk-on play in the equities ... that is causing lack of (major) upward momentum in gold," Wong said.

Last week, U.S. President Donald Trump agreed to trim tariffs on China in exchange for concessions by Beijing on illicit fentanyl trade, U.S. soybean purchases and rare-earths exports.

Elsewhere, spot silver rose 0.6% to $48.92 per ounce, platinum climbed 2.3% to $1,604.21 and palladium gained nearly 1% to $1,447.08.

(Reporting by Ishaan Arora in Bengaluru; Editing by Harikrishnan Nair and Sherry Jacob-Phillips)