Gold hits near 2-week high after US data disappoints

[NEW YORK] Gold prices jumped 1.4 per cent to the highest level in nearly two weeks on Friday after data pointed to weak US inflation, reaffirming doubts that the US central bank would again hike interest rates this year.

US consumer prices were unchanged in June and retail sales fell for a second straight month. Bond yields dipped and the dollar index slid to their lowest level since September 2016 after the weaker-than-expected figures.

Spot gold gained 0.96 per cent at US$1,228.61 per ounce by 3:01pm EDT (1901 GMT) after hitting US$1,232.76. It was poised for a weekly gain of 1.3 per cent, the biggest since mid-May.

The US data bolstered expectations that the US Federal Reserve would likely to move slowly to continue raising interest rates in the absence of inflation signs. Some had been expecting another rate hike in 2017.

Fed Chair Janet Yellen's comments to the US Congress this week "were more dovish than originally anticipated," said David Meger, director of metals trading for High Ridge Futures in Chicago.

Friday's "data reaffirms the delay," he said. "We're seeing precious (prices) buoyed on the back of that." The most-active US gold futures for August delivery futures settled up US$10.20, or 0.84 per cent, at US$1,227.50 per ounce. The contract finished the week up 1.5 per cent, its first gain in six weeks.

The weaker greenback boosted gold, making the dollar-priced commodity cheaper for investors holding other currencies.

Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, said the chart picture had been damaged last week when gold broke below its May lows, but bullion was now fighting back.

"The key level is US$1,230 on gold. In order to turn neutral again we need to move back above that level," he said.

Meanwhile, holdings at the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund fell 0.43 per cent to 828.84 tonnes on Thursday from 832.39 tonnes on Wednesday.

Silver prices rose 1.79 per cent at US$15.94 per ounce, heading toward a weekly gain of 2.3 per cent.

In silver, there was a sharp split between funds, which had largely sold off their record long position, and ETF investors, who had been recently buying, Hansen said.

"A move above US$16.20 could trigger quite a bit of accelerated buying from the funds," he said.

Palladium gained 0.81 per cent at US$858.65 per ounce and was set to end the week 2.4 per cent higher. Platinum rose 1.68 per cent at US$916.65 per ounce, set to end the week up 1.5 per cent.

REUTERS