Spot gold extended gains, recording a record high of $2,589.71 per ounce on Monday, as investors widely expect the Federal Reserve to implement a sharp interest rate cut this week. Meanwhile, the U.S. dollar and U.S. Treasury yields continued to decline.

The market now expects the probability of the Fed implementing a 50 basis point rate cut at its September 17-18 policy meeting to be about 59%, up significantly from 27% a week ago. Futures markets continue to expect the Fed to cut rates by 125 basis points by the end of the year.

Lower rates reduce the opportunity cost of holding gold, which pays no interest.

ANZ has raised its short-term gold price forecast to $2,700 an ounce and its forecast for the end of 2025 to $2,900.ANZ noted that the strength of the price spike will depend on how quickly the Fed cuts rates in the near term. Commodity strategist Soni Kumari added that gold purchases by central banks remained strong.

Spot gold edged up 0.12 percent to trade at $2,581.79 an ounce as of 7:41 GMT on Monday. gold futures for December delivery were up 0.03 percent on the day at $2,611.40 an ounce.

The U.S. dollar index, which reflects the strength of the greenback against six major currencies, edged down 0.45 percent Monday to 100.660.The yield on the 10-year U.S. Treasury note has fallen 30 basis points in the past two weeks.