By Deep Kaushik Vakil
(Reuters) – Gold prices came off session highs on Friday after an uptick in a key U.S. inflation gauge raised bets that interest rates will be higher for longer-than-expected, with bullion on course for a third weekly loss as debt ceiling talks enter the 11th hour.
Spot gold was up 0.5% at $1,949.77 per ounce by 9:45 a.m. EDT (1345 GMT), having risen as much as 0.9% earlier. U.S. gold futures gained 0.3% to $1,950.20.
Bullion pared gains after the personal consumption expenditures (PCE) price index, which the Federal Reserve tracks for its 2% inflation target, increased 4.4% in the 12 months through April after advancing 4.2% in March.
“The PCE number just kicked one of the legs out on the stool of the gold market ….a softer number would have provided the tailwind behind gold,” said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago.
Traders boosted bets that the Fed is not done raising rates, which would erode the attraction of non-yielding gold.
Benchmark 10-year Treasury yields and the dollar index hovered near their highest levels since mid-March, both on track for their third straight weekly gains. [US/] [USD/]
But the dollar eased 0.1% for the session, which “has carved out some breathing space for bullion”, said Han Tan, chief market analyst at Exinity.
Gold briefly slipped to its lowest since March 22 and is still headed to end the week 1.4% lower as the White House and congressional Republicans aim to put the final touches on a deal to raise the debt ceiling.
While some of the bullish sentiment in gold has faded, it could return with supportive data, said Craig Erlam, senior market analyst at OANDA.
Spot silver rose 1.9% to $23.20 per ounce but was also on track for a third consecutive weekly dip.
Platinum gained 0.8% to $1,028.40 while palladium added 1.6% to $1,439.80.
(Reporting by Deep Vakil and Seher Dareen in Bengaluru; Editing by Mark Potter, Kirsten Donovan and Emelia Sithole-Matarise)
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