Gold prices rose on Friday, after slipping to more than one-week lows in the previous session, as soft U.S. inflation numbers offset better-than-expected U.S. second-quarter economic growth that kept bets alive for an imminent interest rate cut.
Spot gold was up 0.3% at $1,418.31 per ounce as of 10:24 a.m. EDT (1424 GMT), but still on track for a first weekly drop in three.
U.S. gold futures also gained 0.3% to $1,418.60 per ounce.
Lower interest rates reduce the opportunity cost of holding non-yielding gold.
The report from the U.S. Commerce Department showed that the economy slowed less than expected in the second quarter as gross domestic product increased at a 2.1% annualised rate.
The report also showed a pickup in inflation last quarter, though the trend remained benign. A gauge of inflation tracked by the Federal Reserve increased at a 1.8% rate last quarter, just below the U.S. central bank’s 2% target.
“The GDP number suggest that Fed may not be as aggressive as they once were but the reason we haven’t collapsed is the inflation number was a little bit worrying,” INTL FCStone analyst Edward Meir said.
Federal funds futures implied traders saw about 84.5% chance for a quarter-point rate cut at the U.S. central bank’s July 30-31 policy meeting, higher than the probability seen shortly before the release of the GDP data.
Capping gold’s momentum was a stronger dollar, which held near two-month highs against a basket of major currencies.
“The market will now focus its attention on next week’s Fed meeting … if Fed Chair Powell indicates that a rate cut cycle is imminent, the dollar is likely to depreciate, which should in turn benefit gold,” Commerzbank said in a note.
Uncertainties over whether Washington and Beijing will be able to settle their trade differences kept many investors on their guard. Negotiators from the two sides will meet in Shanghai next week.
Silver was up 0.1% at 16.42 per ounce, while platinum was also up 0.1% at $865.72.
Analysts say that the disparity in silver and platinum prices compared to gold has made the two metals attractive for traders.
Both silver and platinum were on track for a third week of gains, having risen 1.4% and 2.7%, so far, respectively.
Palladium dipped 0.3% to $1,525.88 per ounce.