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Gold headed for a third straight week of gains

Gold prices

Spot gold slid 0.4 per cent to $2,404.12 per ounce on profit booking after prices climbed 2 per cent on Thursday

Gold prices dropped on Friday but were headed for a third consecutive week of gains as cooler-than-expected U.S. inflation data boosted hopes of the Fed cutting interest rates in September.

Spot gold slid 0.4 per cent to $2,404.12 per ounce, as of 0702 GMT, on profit booking after prices climbed 2 per cent on Thursday.

U.S. gold futures dropped 0.6 per cent at $2,408.00.

Data on Thursday showed U.S. consumer prices unexpectedly dropped and the annual rise was the smallest in a year, drawing the Fed another step closer to reducing interest rates.

Inflation outlook and interest rate picture have moved in favour of gold this week. As we move closer to a lower interest rate environment, conditions could be ripe for gold to set new record highs before the year is out, according to Tim Waterer, KCM Trade’s chief market analyst.

Bets of a September rate cut increased to 93 per cent compared to a 70 per cent probability before the data was released, as per the CME FedWatch Tool.

San Francisco Fed Bank President Mary Daly on Thursday said that she expects further easing in both price pressures and the labour market to warrant interest rate cuts. Meanwhile, Chicago Fed Bank President Austan Goolsbee said the U.S. economy looks like it is back on track to 2 per cent inflation.

Investor focus is now on the U.S. producer price index figure due at 1230 GMT.

The producer price index figures could be the key in determining which side of the $2,400 level gold ends the week at, Waterer added.

Spot silver dropped 2 per cent to $30.80 per ounce, after scaling a more than one-month high on Thursday.

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