Gold at over eight-month high on slower US Fed rate-hike prospects

By Seher Dareen

(Reuters) - Gold prices scaled over an eight-month peak on Friday, holding above the key pivot of $1,900 per ounce, as cooling U.S. inflation raised hopes for slower interest rate hikes from the Federal Reserve.

Spot gold rose 0.3 % to $1,902.64 per ounce by 9:33 a.m. ET (1433 GMT). The metal has risen 2.1% so far in the week, heading for a fourth straight weekly gain.

U.S. gold futures rose 0.4% to $1,906.30.

"Tactically, (gold) and many of the markets have a hangover from yesterday's exuberant rally on the CPI," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

 

Data on Thursday showed that U.S consumer prices fell for the first time in more than 2-1/2 years in December.

Following the data, Fed policymakers expressed relief that inflation continued to ease in December, paving the way for a possible step down to a quarter point interest rate increase at its next policy meeting in February.

Lower interest rates tend to be beneficial for bullion as they decrease the opportunity cost of holding the non-yielding asset.

The U.S. dollar, meanwhile, lost ground after the inflation report and was heading for its worst week in more than a month, making gold less expensive for other currency holders. [USD/]

"We believe that the (gold) market will initially take a breather until it becomes clearer whose prediction of the future course of US monetary policy is more accurate - the market's or the Fed's," Commerzbank analysts said in a note. [GOL/ETF]

Spot silver rose 0.2% to $23.82 per ounce.

Platinum fell 0.8% to $1,059.24 while palladium dipped 2.3% to $1,751.33, both headed for a weekly drop.

The auto catalyst has traded around $112.5 for the week, and the market was looking for a new catalyst in order to get it to go higher, Streible said.

(Reporting by Seher Dareen in Bengaluru; Editing by Mark Porter)