Gold prices extended gains to climb a record high on Monday, as Federal Reserve Chair Jerome Powell's remarks elevated traders' confidence that the U.S. central bank could cut interest rates early next year.

FUNDAMENTALS

* Spot gold was up 0.8% at $2,087.79 per ounce by 0145 GMT. Earlier in the session, bullion surged to an all-time high of $2,111.39.

* U.S. gold futures for February delivery rose nearly 1% to $2,107.60.

* Powell on Friday said "the risks of under- and over-tightening are becoming more balanced," but the Fed is not thinking about lowering rates right now.

* The market viewed his comments as dovish, sending the dollar index and 10-year Treasury yields lower on Friday.

* A weaker U.S. dollar makes greenback-priced gold less expensive for other currency holders.

* While Powell reiterated that the Fed is prepared to tighten policy further if deemed appropriate, traders were convinced the rate-hike cycle was over, pricing in a 70% chance for a rate cut by the U.S. central bank by March next year, CME's FedWatch Tool shows.

* Backing market sentiment, data last week pointed out to cooling inflationary pressures, a gradually easing labour market, with Fed Governor Christopher Waller flagging a possible rate cut if inflation continues to decline.

* Lower interest rates reduce the opportunity cost of holding a non-interest-bearing bullion.

* Euro zone inflation fell to 2.4% in November, data showed last week, providing fresh fuel to bets that the ECB will cut interest rates quicker than the bank has been suggesting.

* The Israeli military said its ground forces were operating against Hamas across the Gaza Strip on Sunday, its clearest indication yet that a planned ground offensive in the enclave's heavily crowded south had begun as Israeli bombing killed and wounded dozens of Palestinians.

* Spot silver rose 0.3% to $25.49 per ounce, palladium advanced 0.8% to $1,008.40 per ounce, while platinum was down 0.2% at $932. 

(Reporting by Harshit Verma in Bengaluru; Editing by Sherry Jacob-Phillips)