By Daksh Grover
(Reuters) – Gold extended gains on Friday, as the U.S. dollar pulled back from two-month highs on heightened expectations for a Federal Reserve rate cut in November with investors looking forward to the central bank’s key inflation gauge for further direction.
Spot gold rose 0.3% to $2,637.31 per ounce by 0930 GMT. U.S. gold futures gained 0.6% to $2,654.30.
The U.S. Producer Price Index data and speeches from several Fed officials are expected later in the day.
“After stronger-than-expected U.S. jobs data and higher-than-expected inflation data, the market is a bit split on how many rate cuts we will see from the Fed over the coming months,” UBS analyst Giovanni Staunovo said.
Data on Thursday showed U.S. consumer prices rose slightly more than expected in September, but the annual increase in inflation was the smallest in more than 3-1/2 years.
Slowly cooling inflation and a U.S. job market that remains strong but at the risk of deteriorating give a green light for more interest-rate cuts in coming months, Fed policymakers indicated on Thursday.
The CME FedWatch tool shows markets currently see an 84.4% chance of a 25-basis-point rate reduction in November and a 15.6% probability of the Fed keeping rates on hold.
“Gold prices are likely to stay volatile in the short term, but we look for higher prices as we look for further rate cuts by the Fed,” Staunovo said.
Gold is on track for its second straight week of declines after prices retreated from a record high of $2,685.42 hit last month.
Physical gold dealers in India charged premiums for the first time in two months this week as the upcoming festival season attracted some jewellery buying.
Spot silver fell 0.1% to $31.14 per ounce and platinum climbed 0.8% to $974.60. Both metals were headed for weekly declines.
Palladium firmed 0.4% at $1,073.50 and was up nearly 6% for the week.
(Reporting by Daksh Grover in Bengaluru additional reporting by Swati Verma; Editing by Shilpi Majumdar)
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