NEW YORK: Gold prices firmed over 1percent on Friday, rebounding from recent losses and finding a short-term floor despite strong US inflation data bolstering expectations of an interest rate hike by the Federal Reserve next week.
Spot gold rose 1.1 percent to USD4,363.01 per ounce by 01:40 p.m. EDT (1740 GMT).
The metal, however, was down about 1.5percent for the week. “Gold is recovering rapidly after a brief dip, as CPI data may be cementing expectations of a Fed rate hike next week. The volatility is somewhat muted, as market had a hike 70percent priced in,” said independent metals trader Tai Wong.
“Price action here suggests that gold is finding a short-term base after the recent retreat.” US gold futures settled nearly unchanged at USD4,408.90 an ounce.
Prices fell nearly 2percent on Thursday after the US Producer Price Index data showed prices increased in line with expectations in August.
The Consumer Price Index rose 0.4percent last month after edging up 0.1percent in July, the labor department’s Bureau of Labor Statistics said on Friday.
Oil prices fell, but remained on course for a weekly gain. Higher oil prices stoke inflation fears, strengthening rate-hike bets. While gold is typically seen as an inflation hedge, higher interest rates diminish the appeal of non-yielding bullion.
Traders are pricing in an 87percent chance of a rate hike at the Fed’s policy meeting next week, up from 67 percent before the inflation data, according to the CME FedWatch Tool.
Gold demand in India was subdued this week as volatile prices discouraged buyers, while investment demand remained strong in top consumer China. Spot silver rose 1.6percent to USD64.54 per ounce, but was down 2.6percent for the week.
Platinum was up 1percent at USD1,792.11, while palladium gained 2.1percent to USD1,308.63. However, both were set for weekly losses.
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