Spot gold was 0.4% higher at $2,311.39 per ounce, with bullion adding 0.5% so far for the week
Gold prices rose on Friday and were on course for their first weekly gain in four, as U.S. economic data suggested a softening of price pressures, fuelling hopes that a rate cut by the Fed might be forthcoming.
Spot gold was 0.4% higher at $2,311.39 per ounce, as of 0654 GMT. Bullion has added 0.5% so far for the week.
U.S. gold futures gained 0.4% to $2,326.40.
Market will try to take cues from what type of comments are coming from Fed officials. But overall, we see that market is set for two interest rate reduction this year, because inflation figures are softening and moving in a desirable direction for the Fed, according to ANZ commodity strategist Soni Kumari.
There could be sentiment-driven retreat in gold prices in the short-term. But that will be a buying opportunity for most of the investors who missed the rally initially, she said.
Data on Thursday showed that U.S. producer prices unexpectedly dropped in May, another indication that inflation was easing, keeping hopes of a Fed rate cut in September alive.
The data followed a cooler-than-expected consumer price index report released just ahead of the Fed meeting on Wednesday, where the central bank pushed out the start of rate cuts to perhaps as late as December.
Traders are seeing a 67% chance of a rate cut in September, as per the CME FedWatch Tool, compared to 63% before the producer prices data.
Lower interest rates would reduce the opportunity cost of holding non-yielding bullion.
The best recipe for gold would be continued weakness in inflation, then that recessionary appeal of gold will start to come through as a bit of an extension of expectations of potential rate cuts this year, according to Kyle Rodda, a financial market analyst at Capital.com.
