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Gold climbed on Wednesday with the prospect of an interest-rate reduction by the Federal Reserve, amid signs of economic weakness in the U.S., lifting the metal’s price to its highest finish in 3½ months.

Futures prices touched highs near $1,349 an ounce after a report early Wednesday on private-sector employment for May from payroll processor ADP said[1] employers hired 27,000 people in the month — marking the lowest growth since March of 2010.

“The ADP data was a huge disappointment for the dollar bulls. Usually this number sets the tone for the biggest economic number, the U.S. [nonfarm payrolls due for release Friday morning] and it appears that this week [that report] is also going to print a soft number,” said Naeem Aslam, chief market analyst at ThinkMarkets UK.

This is the primary reason gold saw a surge in prices, he said. “If the economic numbers start to derail in this way, then the only way for the gold price is up.”

Gold for August delivery on Comex GCM19, +0.42%[2] rose $4.90, or 0.4%, to settle at $1,333.60 an ounce. Most-active contract prices haven’t settled at a level this high since Feb. 20, according to FactSet data.

However, prices pared earlier gains to finish off the day’s high of $1,348.90 as U.S. benchmark stock indexes moved higher[3] in Wednesday dealings, dulling some of the demand for gold.

The precious metal posted a sixth consecutive gain—the longest win streak since an 11-day rally ended Jan. 5, 2018. Gold has seen a more than 4% year-to-date advance, and a...

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