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Gold prices lingered close to a two-month high on Monday, after softer U.S. economic readings last week cemented prospects of an interest rate cut in June by the Federal Reserve.

Spot gold edged 0.1% lower to $2,081.11 per ounce, as of 0400 GMT, but hovered near $2088.19, a level seen on Friday when the contract hit its highest since Dec. 28. U.S. gold futures fell 0.3% to $2,090.00.

"The key drivers for gold is what's going to happen on the interest rate front - and we saw a move higher in gold on Friday because a series of macro releases out of the U.S. moved the narrative towards the Fed possibly decreasing rates sooner than expected," Marex analyst Edward Meir said.

Gold prices rose about $50 last week, with absolutely all of the gains coming on the last two days on the back of poor U.S. manufacturing and construction spending data and easing price pressures, according to the Fed's preferred inflation gauge.

The rally was also possibly on account of short-covering as a jump this big in just a short period suggests that "some of the shorts were caught off-guard," said Meir.

Traders have raised their hopes for a June rate cut, and are now seeing a 74% chance, compared with about 65% chance last Monday, according to LSEG's interest rate probability app.

Lower interest rates boost the appeal of non-yielding bullion.

The next major U.S. economic release will be February's employment report due on Friday.

Spot platinum fell 0.7% to $884.35 per ounce, and palladium rose 0.1% to $956.53. Both metals have fallen more than 10% so far this year.

Platinum mining companies in South Africa are caught up in a crisis as the auto-catalyst metal's prices dwindle.

Spot silver fell 0.4% to $23.06.