Gold advances to 4-week peak as US rate cuts expected soon

Gold advances to 4-week peak as US rate cuts expected soon

Gold started March on a positive note, with prices rising to a four-week high on Friday after data showing signs of abating inflation hardened expectations of a U.S. rate cut by June.

Spot gold edged up 0.6% to $2,054.69 per ounce by 9:29 a.m. ET (1429 GMT), its highest since early February and on track for a second straight weekly rise. U.S. gold futures firmed 0.4% to $2,063.70.

Spot silver rose 0.3% to $22.73.

Data on Thursday showed the annual increase in U.S. inflation in January was the smallest in nearly three years, keeping a June interest rate cut from the Federal Reserve on the table.

Bart Melek, head of commodity strategies at TD Securities, said gold is seeing some upside as the market is convinced that the Fed will ease its monetary policy by mid-year, lowering the opportunity cost of bullion.

"In three-four months, prices will hit a record if we see poor economic data and the market is convinced that Fed is ready to cut," he said, adding that strong central bank buying is also supporting the market currently.

Lower interest rates tend to boost demand for non-yielding gold.

"The short-term direction of gold and silver will continue to be dictated by incoming economic data and their impact on the dollar, yields and not least rate cut expectations," said Ole Hansen, Saxo Bank's head of commodity strategy in a note.

Physical gold demand in India was subdued for the week as an uptick in domestic prices dented sentiment and prompted buyers to delay purchases. [GOL/AS]

Spot platinum slipped 0.2% to $874.10 ounce while palladium was also down 0.2% at $940.30. Both eased on a weekly basis.

Northam Platinum's CEO said platinum mining companies in South Africa are caught up in the worst crisis in three decades as prices plummet.