Gold holds firm above USD 2,400 level, set for third weekly rise

Gold prices held above the key USD 2,400 per ounce pivot on Friday and were headed for their third straight weekly gain, as investors grew confident that the US Federal Reserve was on track to lower interest rates soon.

Spot gold was steady at USD 2,417.36 per ounce as of 1:50 p.m. ET (1750 GMT). The bullion was up 1% for the week so far.

US gold futures settled mostly unchanged at USD 2,420.70.

Gold prices rallied to their highest since May 22 on Thursday after an unexpected decline in US consumer prices. The data strengthened the view that the disinflation trend has resumed and lifted hopes for rate cuts by the Fed.

“We’re seeing some profit-taking pressure, a routine corrective pullback after the solid gains. Today’s producer price index report was hotter than expected and that added to some selling pressure,” said Jim Wyckoff, senior market analyst at Kitco Metals.

“However, judging from the reaction of the stock market and the bond market, today’s PPI number does not really mitigate the cooler inflation report we saw on Thursday. So the odds are high for a rate cut this year, possibly as early as September.”

US producer prices increased moderately in June, further confirming that inflation had resumed its downward trend and strengthening the case for a September interest rate cut.

Markets are now pricing in a 94% chance of a rate cut in September, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding the non-yielding bullion.

Elsewhere, spot silver slipped 1.5% to USD 30.95 per ounce after scaling an over one-month high on Thursday.

Platinum fell 0.1% to USD 1,003.10 and palladium slipped 1.8% to USD 976.63. Both metals were set to register weekly declines.

“We still consider the new technologies so far to be insufficient to offset the loss in autocatalyst demand, particularly for palladium, and therefore remain long-term bearish,” Citi said in a note.

(Reporting by Brijesh Patel in Bengaluru; Editing by Vijay Kishore, Shinjini Ganguli and Shailesh Kuber)