KONTAN.CO.ID - SINGAPORE. Gold prices firmed on Monday, as expectations that the U.S. Federal Reserve would start cutting interest rates later in the year and tensions in the Middle East lifted bullion's appeal.

Spot gold rose 0.6% to $2,314.31 per ounce by 0636 GMT. U.S. gold futures was up 0.6% to $2,322.20.

"Investors will look at the political situation in the Middle East and how the ongoing negotiations for a ceasefire play out. If the hopes of a truce become lesser, gold will gain," said Kelvin Wong, a senior market analyst for Asia Pacific at OANDA.

Prospects for a Gaza ceasefire appeared slim on Sunday as Hamas reiterated its demand for an end to the war in exchange for the freeing of hostages but Israeli Prime Minister Benjamin Netanyahu flatly ruled that out. Israel military called on Palestinian civilians to evacuate Rafah as part of a 'limited scope' operation.

"Weaker U.S. data offers more policy flexibility for the Fed in terms of rate cuts," paving way for gold prices to stabilise, said IG market strategist Yeap Jun Rong.

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Data on Friday showed U.S. job growth slowed more than expected in April, reinforcing expectations that the Fed will start cutting rates later this year.

Markets are pricing in a 70% chance of a U.S. rate cut in September, as per CME's FedWatch Tool. Lower interest rates reduce the opportunity cost of holding bullion.

New York Fed Bank President John Williams said on Friday that the 2% target for inflation is "critical" to the Fed's efforts to achieve price stability.

Meanwhile, the Perth Mint's gold product sales in April jumped two-fold from a month earlier, while silver sales fell to their lowest since December.

Spot silver advanced 1.7% to $26.98 per ounce, platinum was flat at $955.42 and palladium gained 0.5% to $950.19.

Editor: Wahyu T.Rahmawati