Gold Eyes Best Week in More Than Two Years on Hopes of Less Aggressive Fed

GOLD - LONDON. Gold prices edged higher on Friday en route to their biggest weekly gain in more than two years as U.S. data pointing to slowing inflation boosted hopes that the Federal Reserve would slow its aggressive rate hikes.

Spot gold was up 0.4% at $1,761.73 per ounce, as of 0610 GMT. Prices have risen 4.7% so far in the week, heading for their biggest gain since July 2020.

U.S. gold futures rose 0.6% to $1,764.50.

The dollar index inched 0.3% lower and was headed for its biggest weekly drop since March 2020. A weaker dollar makes gold more appealing to overseas buyers.

U.S. consumer prices rose less than expected in October, indicating that inflation was slowing, which raised hopes that the Fed will begin scaling back its hefty rate hikes.

"The softer-than-expected CPI print supports the case for a step down in the pace of hike at the December Fed meeting that can translate into a resumption of the dollar trend lower, providing a window for gold to stage a mild recovery," said Christopher Wong, OCBC FX strategist.

Read Also: U.S. Consumer Prices Increase Less Than Expected in October

If the euphoria in the market continues, gold prices could rise much higher and hit the $1,762-$1,767 range in the near term, Wong said.

Market participants now see a 71.5% chance of a 50-basis-point rate hike at the Fed's December meeting.

Gold is considered a hedge against inflation, but rising rates increase the opportunity cost of holding non-yielding bullion.

The biggest challenge facing central bankers now is bringing inflation down, International Monetary Fund Managing Director Kristalina Georgieva said on Thursday.

Silver rose 1.5% to $21.99 per ounce and was poised for its second straight weekly advance.

Platinum rose 1.8% to $1,050.88 per ounce, heading for its biggest weekly gain since February 2021. Palladium gained 0.1% to $1,965.75.