GOLD prices surged to record highs on Monday, driven by a softer dollar and expectations of a larger interest rate cut by the U.S. Federal Reserve this week.

Spot gold was up 0.4% to $2,585.54 per ounce, as of 0338 GMT, after hitting an all-time high of $2,588.81 earlier in the session.

U.S. gold futures edged 0.1% higher to $2,613.40.

The dollar weakened 0.2%, making gold less expensive for other currency holders.

"The prospect of the Fed potentially wielding the axe by delivering a 50 basis point cut this week has sent gold and the dollar in opposite directions," said Tim Waterer, chief market analyst at KCM Trade.

"Overall conditions for gold remain favourable, with further gains likely. If the dollar continues its downward trend, gold could reach $2,700 by year-end."

All eyes will be on the Fed this week as speculation mounts over the extent of the rate cut at its Sept. 17-18 monetary policy meeting and the pace of future reductions. The Bank of England and Bank of Japan are also announcing policy decisions later this week.

Markets are currently pricing in an 59% probability of a 50 bps cut on Wednesday, up from 43% on Friday, according to the CME FedWatch tool. This would be Fed's first rate cut since 2020.

Data on Friday showed that U.S. consumer sentiment improved in September amid subsiding inflation, though Americans remained cautious ahead of the November presidential election.

Zero-yield bullion tends to be a preferred investment amid lower interest rates and geopolitical turmoil.

Elsewhere, Republican presidential candidate Donald Trump was the subject of a second assassination attempt on Sunday, according to the FBI.

Spot silver gained 1% to $30.95 per ounce, marking it highest level in two months.

Platinum climbed 0.5% to $1,000.35 and palladium edged 0.1% higher to $1,069.52.

 - Reuters