Softer dollar sets gold on track for best week since mid-January

Gold prices climbed to their highest in more than two weeks on Friday and were on track for their biggest weekly rise since mid-January, supported by a softer dollar as investors gauged the U.S. central bank’s policy path.

Spot gold was up 0.5% at $1,844.60 an ounce by 1244 GMT, after hitting its highest since Feb. 15. Prices have risen about 2% so far this week.

U.S. gold futures rose 0.7% to $1,852.60.

The U.S. dollar index is headed for a weekly drop of 0.4%, making bullion priced in the currency more attractive to overseas buyers. [USD/]

Gold has found support around the $1,800 level and if there is a break above $1,865, there will be some fresh demand, said Ole Hansen, head of commodity strategy at Saxo Bank.

“If we see any signs of weakness in economic data and it results in lower rate hike expectations, it will be supportive,” he added.

Atlanta Fed President Raphael Bostic said on Thursday the impact of higher U.S. rates on the economy may only begin to “bite” in earnest this spring, an argument for the U.S. central bank to stick with “steady” quarter-point rate increases. Despite gold being known as an inflation hedge, rising interest rates raise the opportunity cost of holding zero-yielding bullion and make it a less attractive bet.

Meanwhile, data on Thursday showed the number of Americans filing new claims for unemployment benefits fell again last week, pointing to sustained labour market strength.

Physical gold prices traded at a premium in India this week, as a drop in domestic rates encouraged buying, while China saw healthy demand and fresh imports in the region. [GOL/AS]

Spot silver gained 0.7% to $21.04 per ounce and was set for its biggest weekly increase since Jan. 13.

Platinum added 0.9% to $969.10 and was on track for its best week since November. Palladium was up 1.1% at $1,433.62.