Gold prices rose to their highest level in nearly three weeks on Friday as the dollar and bond yields fell ahead of key U.S. inflation data that could offer more clarity on the Federal Reserve’s interest rates path next year.
Spot gold was up 0.8% to $2,061.60 per ounce at 1225 GMT and U.S. gold futures were up 1.1% to $2,073.70.
Gold rose to its highest since Dec. 4 earlier in the session and is set for a 2.2% weekly gain, its second in a row.
The U.S. November core personal consumption expenditure (PCE) price index report is due at 1330 GMT. Market participants expect the index to have risen 3.3% on an annual basis, compared with October’s 3.5%.
“Any data above expectation can be a negative catalyst for bullion,” Carlo Alberto De Casa, market analyst at Kinesis Money, said.
“The major trend for gold remains positive, with at least first resistance level of $2,070, while in the medium term there are good chances of seeing gold again reach $2,130,” De Casa said.
Traders are now pricing-in an 83% chance of a U.S. rate cut by March, according to the CME FedWatch tool. Lower interest rates decrease the opportunity cost of holding non-yielding bullion. Fed officials have been pushing back against the idea of rapid rate cuts next year, but these remarks have done little to change investor sentiment.
“If the markets are pricing in so many rate cuts and the dollar and yields are lower, then gold is going to perform really well,” said Craig Erlam, senior markets analyst at OANDA.
The dollar index wobbled near a five-month low, making bullion more attractive to overseas buyers. Benchmark U.S. 10-year bond yields were near their weakest level since July. [US/]
In other metals, silver gained 0.4% to $24.4956 per ounce. Platinum rose 0.7% to $969.99 and palladium rose 0.7% to $1,222.33. All three metals were on track for their second consecutive week of gains.
(Reporting by Hissay Ongmu Bhutia in Bengaluru; Editing by Jane Merriman and Mark Potter)