Gold hit a fresh record Monday on growing optimism that the Federal Reserve will cut interest rates in the new year, with traders shrugging off boss Jerome Powell's attempts to temper expectations.

However, equity markets struggled to build on a positive lead from Wall Street, with attention now turning to key US jobs figures due at the end of the week.

Bets on an easing of monetary policy were ramped up when Powell said Friday that it was "well into restrictive territory" after more than a year of hikes that have put borrowing costs at a two-decade high.

Stocks have rallied and the dollar has fallen in recent weeks as a string of data has pointed to a softening of the labor market and a slowdown in economic activity, while inflation continues to drop towards the bank's two percent target.

Bullion jumped to as high as $2,135 at one point Monday as traders, having risen in recent weeks on safe-haven buying as the Israel-Hamas war started. 

It has been given extra strength as a string of data points to a slowdown in inflation that has led to speculation the Fed can slash rates.

Bets on a drop in rates have weighed on the dollar, which has in turn made gold cheaper for international buyers. 

Bloomberg reported that traders saw a 60 percent chance of such a move in March, while they have fully priced one in May. 

"Markets are piling in on the rate cut bets," Kyle Rodda, of Capital.com, said.

"Gold can run higher and will do at the earliest sign of a recession."

Powell tried to dampen expectations after his remarks last week, warning that it remained "premature" to speculate on when policymakers will begin cutting.

He added the bank was "prepared to tighten (monetary) policy further if it becomes appropriate to do so".

His comments come after Governor Chris Waller suggested a cut could come next year if data allowed it.