Gold set for fourth weekly gain as US dollar under pressure

Aug 12 (Reuters) – Gold prices were flat on Friday, weighed down by an uptick in the Treasury yields and prospects of US interest rate hikes, although broader weakness in the dollar kept bullion on track for its fourth weekly gain.

FUNDAMENTALS

* Spot gold was flat at USD 1,787.57 per ounce, as of 0120 GMT. However, bullion has gained 0.7% so far this week.

* US gold futures fell 0.2% to USD 1,803.10.

* Benchmark US 10-year Treasury yields were hovering near a three-week peak, increasing the opportunity cost of holding non-interest-bearing gold.

* Data on Thursday showed US producer prices unexpectedly fell in July. It came a day after news that consumer prices (CPI) were unchanged in July due to a drop in gasoline prices.

* San Francisco Federal Reserve Bank President Mary Daly said a 50-basis-point interest rate hike in September “makes sense” given the recent economic data including on inflation, but that she is open to a bigger rate hike if data warrants.

* Earlier this week, US Fed policymakers noted that they would continue to tighten monetary policy until price pressures were fully broken.

* Fed funds futures traders are now pricing in a 61.5% chance of a 50-basis-point hike in September and a 38.5% chance of a 75-basis-point increase.

* Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.

* The dollar was set for its third weekly loss in four against its rivals. A weaker greenback makes dollar-denominated gold less expensive for other currencies.

* Spot silver eased 0.1% to USD 20.27 per ounce, platinum fell 0.2% to USD 954.32, and palladium was steady at USD 2,277.13.

(Reporting by Brijesh Patel in Bengaluru; Editing by Sherry Jacob-Phillips)