Gold edges up as weaker dollar counters rate jitters

GOLD prices edged higher on Friday due to a pullback in the dollar, though gains were curbed as data showing a rise in US inflation fanned fears of a sooner-than-expected rate hike.

Spot gold was up 0.2 per cent at US$1,829.61 per ounce by 0626 GMT. US gold futures rose 0.2 per cent at US$1,827.40.

The metal traded flat for the week.

The dollar index was down 0.1 per cent against its rivals, making gold cheaper for other currency holders.

"Inflation is not necessarily bad for gold, however, it's bad if the central banks start to act on it, and the market is getting a little bit jittery thinking that this could bring forward the US Federal Reserve's taper a little bit," said Stephen Innes, managing partner at SPI Asset Management.

Key US economic readings this week showed a bigger-than-expected rise in consumer prices and weekly jobless claims dropping to a 14-month low, intensifying concerns over rising inflation and prospects of a rise in interest rates.

Higher interest rates increase the opportunity cost of holding bullion.

"Right now we haven't had any inclination that the Fed is about to move anytime soon, I think gold still remains relatively supported," Mr Innes said, adding that strong economic data still remains a key concern.

The US central bank has pledged to keep interest rates low until the economy reaches full employment, and inflation is on track to "moderately" exceed the 2 per cent level for some time.

"We'll need some more clarity in terms of how persistent inflation is. If it turns out to be transitory, yields will remain lower," said Harshal Barot, a senior research consultant for South Asia at Metals Focus.

Investors now await US retail sales data due later in the day.

Elsewhere, palladium gained 1.8 per cent to US$2,914.28 per ounce. Silver rose 0.1 per cent to US$27.09, while platinum was up 0.9 per cent at US$1,216.69. REUTERS