Investing.com - Gold prices added to strong overnight gains during Europe's session on Wednesday, touching a more than two-week high after surprisingly weak U.S. service sector data reinforced expectations the Federal Reserve will hold off on raising rates in September.
Gold for December delivery on the Comex division of the New York Mercantile Exchange rose to a daily peak of $1,357.60 a troy ounce, the most since August 18. It was last at $1,355.35 by 3:10AM ET (07:10GMT), up $1.30, or 0.1%.
A day earlier, the yellow metal surged $27.30, or 2.06%, after data showed that U.S. service sector activity expanded at its weakest level since February 2010.
The Institute of Supply Management (ISM) said its non-manufacturing purchasing manager's index fell to 51.4 last month from 55.5 in July. Analysts had expected the index to drop to 55.0.
That followed last week's lackluster U.S. employment report as well as the ISM's manufacturing survey, which showed a shocking contraction in activity.
The recent string of disappointing data all but quashed talk of a rate hike from the Federal Reserve at its policy meeting later this month.
According to Investing.com's Fed Rate Monitor Tool, investors are pricing in a 21% chance of a rate hike at the Fed's September 20-21 meeting. For December, odds stood at around 50%.
Gold is sensitive to moves in U.S. rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Reduced prospects of a near-term rate hike sent the dollar broadly lower. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 94.84 early Wednesday, after falling to a one-week low of 94.68.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.