Gold Prices Poised for Second Weekly Increase Amid Fed Rate Cut Hopes

Gold prices appeared set for a second consecutive weekly gain on Friday, driven by recent U.S. inflation data that heightened expectations of a Federal Reserve interest rate cut this year.

Spot gold edged up 0.1% to $2,379.14 per ounce as of 0236 GMT, with bullion prices having gained 0.7% this week. U.S. gold futures remained steady at $2,383.20 per ounce.

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The dollar index declined by 0.6% for the week, making gold more affordable for holders of other currencies. 

The positive momentum for gold prices may persist, as recent U.S. economic data provides the Fed with potential leeway for earlier rate cuts in 2024 amid ongoing geopolitical tensions. Gold bulls are now eyeing the metal's record high.

Those who have been trading Gold have observerd that Xau recovered nearly 5% over the past two weeks. While the clarity provided by U.S. consumer price index data and the approaching weekend might trigger some profit-taking, the recent data indicating cooling inflation offers the Federal Reserve positive news. However, policymakers have yet to openly change their stance on the timing of the anticipated rate cuts, which investors believe will commence this year.

Gold is traditionally seen as a hedge against inflation, but higher interest rates increase the opportunity cost of holding non-yielding assets like gold.