Gold trades below two-week highs as US inflation data stokes rate worries

Oct 13 – Gold prices edged up on Friday but traded below two-week highs hit in the last session, as a bigger-than-expected jump in US consumer prices boosted bets interest rates would stay high for longer, lifting dollar and bond yields from their recent lows.

FUNDAMENTALS

* Spot gold was up 0.2% to USD 1,872.20 per ounce by 0058 GMT, after touching its highest level since Sept. 27 at USD 1,884.79 on Thursday. US gold futures GCcv1 added 0.1% to USD 1,884.70.

* Gold is still on track for a more than 2% rise this week, the most since mid-March, as military clashes between Israel and the Palestinian Islamist group Hamas boosted demand for safe-haven bullion.

* Gold is seen as a safe-haven investment during times of economic uncertainty, but as it yields no interest, it tends to lose its attraction when interest rates rise.

* US Treasury yields rose and the dollar strengthened, while global stock markets fell after data on Thursday showed US consumer prices increased in September amid a surprise surge in rental costs.

* Traders see a stronger chance the US Federal Reserve would end up delivering another interest-rate hike this year, and keep rates higher for longer next year.

* Fed Bank of Boston President Susan Collins said the latest inflation data underscores uneven progress toward restoring price stability, reiterating her view that the central bank might have to raise rates again to combat inflation.

* European Central Bank policymakers expressed cautious optimism on Thursday that inflation was on its way back to 2% even without more rate hikes.

* In other metals, spot silver rose 0.3% to USD 21.90 per ounce, platinum fell 0.2% to USD 866.68 and palladium shed 0.4% to USD 1,139.73.

(Reporting by Swati Verma in Bengaluru; Editing by Rashmi Aich)