Dec 28 (Reuters) - Gold prices climbed to a three-week high on Thursday as the U.S. dollar and bond yields touched multi-month lows on mounting bets that the U.S. central bank will start to cut interest rates as early as March next year.
FUNDAMENTALS
* Spot gold was up 0.5% at $2,086.66 per ounce, as of 0211 GMT, hitting its highest since Dec. 4, when prices raced to a record high of $2,135.40.
* U.S. gold futures rose 0.2% to $2,097.10 per ounce.
* Bullion looked set to log its best year in three with a 14% gain, as the war in Ukraine and tensions in the Middle East boosted safe-haven inflows and bets of U.S. rate cuts lifted the metal's appeal.
* Bets for interest rate cuts from the U.S. Federal Reserve have firmed following cooler inflation data, with traders now pricing in an 88% chance of monetary policy easing in March, according to the CME FedWatch tool.
* Lower interest rates decrease the opportunity cost of holding non-yielding bullion.
* The dollar index slipped to a five-month low and was set for its worst yearly performance since 2020, while benchmark U.S. 10-year bond yields languished near their lowest level since July.
* Meanwhile, London's gold price benchmark hit an all-time high of $2,069.40 per troy ounce at an afternoon auction on Wednesday, the London Bullion Market Association (LBMA) said.
* Spot silver rose 0.8% to $24.44 per ounce and was poised to end the year with a near 2% annual gain.
* Platinum rose 0.2% to hit a more than six-month high of $999.00. Palladium climbed 0.9% to $1,163.91, but was on track for its biggest yearly decline since 2008.
DATA/EVENTS (GMT) -- India HY Fin Stability report -- 1100 Brazil IGP-M Inflation Index Dec 1200 Canada Business Barometer Dec 1330 US Wkly Jobless Claims -- (Reporting by Harshit Verma in Bengaluru; Editing by Subhranshu Sahu)
