Gold prices hit two-week highs early on Friday and were poised for their biggest weekly jump since mid-January, after the US Federal Reserve's cautious note on interest rates arrested a dollar rally and sparked broad-based buying of commodities. The US currency fell as much as 1.8 percent against a basket of major currencies on Friday, after the Fed downgraded its growth and inflation projections earlier in the week, signalling it is in no rush to push borrowing costs to more normal levels.
Spot gold was up 1.2 percent at $1,184.55 an ounce by 1:55 pm EDT (1755 GMT) after hitting $1,187.80, and US gold futures for April delivery closed up $15.60 an ounce at $1,184.60.
"Today's run is part of a broad-based correction with the dollar weakness," said Eli Tesfaye, senior market strategist for RJO Futures in Chicago.
Spot gold has risen over 2 percent this week, recovering from a four-month low touched on Tuesday under pressure from expectations that the US central bank is on track for its first interest rate increase in nearly a decade.
Such a move would boost the dollar and lift the opportunity cost of holding non-yielding bullion. The Fed, however, indicated it preferred a more gradual path.
"We obviously saw a slight change in sentiment earlier this week, with Janet Yellen apparently joining an ever-increasing number of central bank doves," Saxo Bank's head of commodity research Ole Hansen said, referring to the Fed chief.
"I think we will settle into a $1,150 to $1,190 range for now."
Post-Fed, the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, saw its first inflows since Feb. 20, also boosting sentiment.
In the physical markets, Chinese buying was steady, with premiums on the Shanghai Gold Exchange staying at a robust $6-$7 an ounce on Friday. Sustained physical buying could further support prices. Silver outperformed other precious metals to hit
1-high of $16.89 an ounce and was up 4.7 percent at $16.85, and spot platinum was up 1.5 percent at $1,139.70 an ounce.
Platinum continued to trade at a roughly $50 discount to gold, a factor that is likely to stoke physical demand according to the Perth Mint, which is ramping up production of its platinum coins.
Palladium was up 1.2 percent at $773.98 an ounce, though it was the worst-performing precious metal of the week, down nearly 2 percent.
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