Gold set to snap nine-week winning streak as US inflation test looms

Gold prices eased on Friday and were on track for their first weekly drop in 10, weighed down a stronger dollar and as market participants squared positions ahead of a key U.S. inflation report due later in the day.

Spot gold was down 0.2% at $4,118.68 per ounce, as of 0315 GMT. Bullion has fallen 3% so far this week, heading for its biggest weekly percentage drop since mid-May.

U.S. gold futures for December delivery fell 0.3% to $4,133.40 per ounce.

The dollar index gained for a third straight session against its rivals, making gold more expensive for other currency holders.

“A meeting between the U.S. and Chinese leaders stands a decent chance of de-escalating trade tensions, which is aiding the dollar and drying up some safe-haven demand for gold,” said KCM Trade Chief Market Analyst Tim Waterer.

U.S. President Donald Trump will meet Chinese President Xi Jinping next week as part of a trip to Asia, the White House said on Thursday.

Trade tensions between Washington and Beijing have been escalating, marked by tit-for-tat retaliatory measures announced by both sides.

Focus is now on the U.S. Consumer Price Index (CPI) report, which is expected to show that core inflation held at 3.1% in September.

The report has been delayed due to the government shutdown.

Investors have nearly fully priced in a 25-basis-point rate cut at the Federal Reserve’s meeting next week.

“From gold’s perspective, a tame CPI print would be welcomed as this would keep the Fed on track to cut rates twice before year-end,” Waterer said.

“But any upside surprises in inflation would likely see the dollar gain further traction higher, which could be to the detriment of gold.”

Gold tends to appreciate when interest rates are low as they reduce the opportunity cost of holding non-yielding bullion.

Elsewhere, spot silver fell 0.6% to $48.62 per ounce and was on track for its worst week since March, down 6% so far this week.

Platinum rose 1% to $1,640.98 on Friday and palladium slipped 1.1% to $1,441.04.