Gold races for best week since March 2020 on Fed slowdown hopes

(Reuters) - Gold prices extended gains to a near three-month high on Friday and were heading for their best week in over 2-1/2 years, as signs of cooling U.S. inflation bolstered bets that the Federal Reserve would be less hawkish on rate hikes going forward.

FILE PHOTO: Gold bars are pictured on display at Korea Gold Exchange in Seoul, South Korea, August 6, 2020. REUTERS/Kim Hong-Ji/File Photo

Spot gold gained 0.7% to $1,766.39 per ounce by 14:28 p.m. ET (1928 GMT), after hitting its highest since Aug. 18 earlier in the session. Bullion is up over 5% so far this week.

U.S. gold futures settled up 0.9% at $1,769.4.

“We are seeing a follow-through in gold prices on yesterday’s CPI data, a weaker dollar and the likelihood that the Fed is going to do a half-point rate hike versus the 75-basis point hike,” said Bob Haberkorn, senior market strategist at RJO Futures.

U.S. consumer prices rose less than expected in October and data showed annual inflation below 8% for the first time in eight months.

The inflation data triggered a sharp fall in the U.S. dollar, which was headed for its biggest two-day drop in almost 14 years, making gold more appealing for other currency holders. [USD/]

Markets are now pricing in a 71.5% chance of a 50-basis point rate hike at the Fed’s December meeting, up from around 50/50 a week ago.

“The precious metals bulls are charged up late this week as their near-term technical postures have turned bullish at the same time the U.S. dollar index and U.S. Treasury yields are dropping,” Jim Wyckoff, senior analyst at Kitco Metals, said. [US/]

Gold is trading above its 50-day and 100-day moving averages, which is considered a bullish signal by traders.

Elsewhere, spot silver slipped 0.3% to $21.6 per ounce, but was poised for its second straight weekly rise having hit its highest since June.

Platinum fell 0.4% to $1,027.62 and was headed for its fourth consecutive weekly gain as it touched a high since March earlier. Palladium climbed 2.8% to $2,019 and was on course for a weekly rise.

Reporting by Brijesh Patel and Kavya Guduru in Bengaluru; additional reporting by Swati Verma; Editing by Shounak Dasgupta, Andrea Ricci and Shailesh Kuber