By: Reuters

Gold prices rose on Monday as a weaker dollar and fading expectations of a U.S. Federal Reserve rate hike next month supported the bullion.

Spot gold XAU= rose 0.6% to $4,402.49 per ounce by 0825 GMT. Prices hit a more-than-two-month high last week.

U.S. gold futures GCcv1 for December delivery edged 0.5% higher to $4,458.70.

The U.S. dollar index .DXY was down 0.3%, making gold cheaper for buyers holding other currencies. USD/

"Gold is benefiting today from a weaker USD and lower US interest rates. Based on weaker-than-expected jobs data and lower inflation data, the market participants have started to reduce their expectations of US Fed hikes this year, which has supported the yellow metal," said UBS analyst Giovanni Staunovo.

Data showed U.S. payrolls unexpectedly fell in July and mild consumer price inflation, reducing expectations that the U.S. Federal Reserve will raise interest rates next month.

Markets are now pricing a 31% chance of a September rate hike from 51% a month earlier, CME's FedWatch Tool showed. FEDWATCH

Lower interest rates tend to support gold, which does not pay interest.

Investors are awaiting minutes from the Fed's July meeting, due on Wednesday, for further clues on the central bank's policy outlook.

"U.S. gasoline prices remain above USD 4/gallon, keeping some pressure on inflation data in the next report," Staunovo added.

On the geopolitical front, U.S. President Donald Trump's envoys met with Egyptian, Qatari and Turkish mediators in Cairo on Sunday, a diplomatic source said, aiming to advance his Gaza peace plan, even as Israel pressed on with airstrikes in the enclave.

Among other metals, spot silver XAG= rose 1.5% to $65.60 per ounce. Platinum XPT= gained 0.6% to $1,768.23, while palladium XPD= climbed 1.7% to $1,335.75.

(Reporting by Dharna Bafna in Bengaluru; Editing by Janane Venkatraman)